Exhibit 10.1

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF ANY STATES IN THE UNITED STATES. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

CONVERTIBLE PROMISSORY NOTE

 

Date of Note: October 14, 2020     Principal Amount of Note: $500,000

 

For value received VALQARI LLC, a Delaware limited liability company (the
“Company”), promises to pay to the undersigned holder or such party’s assigns
(the “Holder”) the principal amount set forth above with simple interest on the
outstanding principal amount at the rate of 3% per annum. Interest shall
commence with the date hereof and shall continue on the outstanding principal
amount until paid in full or converted. Interest shall be computed on the basis
of a year of 365 days for the actual number of days elapsed. All unpaid interest
and principal shall be due and payable six (6) months from the Date of Note set
forth above (the “Maturity Date”); provided, however, the Maturity Date shall
automatically extend for an additional six (6) month period in the event that,
as of the initial Maturity Date: (i) the Company has received a good faith
written acquisition offer for a consideration value greater than Fifteen Million
Dollars ($15,000,000) containing all material terms to enter into a transaction
in which the consummation of such transaction would amount to a Change of
Control (as defined below) and is, at such time, engaged in the process therein;
or (ii) the Company has initiated, or is in the process of initiating, a
conversion to a “C-Corporation” under the Internal Revenue Code, whereas such
conversion will be completed no later than one day prior to the extended
Maturity Date.

 

1.                  Basic Terms.

 

(a)                Payments. All payments of interest and principal shall be in
lawful money of the United States of America and shall be applied first to
accrued interest, and thereafter to principal.

 

(b)                 Prepayment. The Company may not prepay this Convertible
Promissory Note (this “Note”) prior to the Maturity Date without consent of the
Holder in its sole discretion.

 

2.                  Conversion and Repayment.

 

(a)                 Conversion. In the event of a Change in Control (as defined
below) or conversion of the Company to a “C-Corporation” under the Internal
Revenue Code on or before the Maturity Date, Holder may convert the outstanding
principal amount of this Note and any unpaid accrued interest into: (i)
immediately prior to the closing of a Change in Control, Class B Common Units
(with such rights and privileges as set forth in the Operating Agreement of the
Company, as amended from time to time); or (ii) upon the Company’s conversion to
a C-corporation, shares of Company common stock, in both cases at a conversion
price no higher than a pre-money valuation of Fifteen Million Dollars
($15,000,000.)

 

 

 

 

(b)                 Change of Control. For purposes of this Note, a “Change of
Control” means (i) a consolidation or merger of the Company with or into any
other non-affiliated corporation or other entity or person, or any other
corporate reorganization, other than any such consolidation, merger or
reorganization in which the membership interest of the Company immediately prior
to such consolidation, merger or reorganization continue to represent a majority
of the voting power of the surviving entity immediately after such
consolidation, merger or reorganization; (ii) any transaction or series of
related transactions to which the Company is a party in which in excess of fifty
percent (50%) of the Company’s voting power is transferred; or (iii) the sale or
transfer of all or substantially all of the Company’s assets, or the exclusive
license of all or substantially all of the Company’s material intellectual
property; provided that a Change of Control shall not include any transaction or
series of transactions principally for bona fide equity financing purposes in
which cash is received by the Company or any successor, indebtedness of the
Company is cancelled or converted or a combination thereof. The Company shall
give the Holder notice of a Change of Control not less than ten (10) days prior
to the anticipated date of consummation of the Change of Control. Any repayment
pursuant to this paragraph in connection with a Change of Control shall be
subject to any required tax withholdings, and may be made by the Company (or any
party to such Change of Control or its agent) following the Change of Control in
connection with payment procedures established in connection with such Change of
Control.

 

(c)                Procedure for Conversion. In connection with any conversion
of this Note into Class B Common Units or common stock, the Holder shall
surrender this Note to the Company and deliver to the Company any documentation
reasonably required by the Company. The Company shall not be required to issue
or deliver the Class B Common Units or common stock, as the case may be, into
which this Note may convert until the Holder has surrendered this Note to the
Company and delivered to the Company any such documentation. Upon the conversion
of this Note pursuant to the terms hereof, in lieu of any fractional units or
shares to which the Holder would otherwise be entitled, the Company shall pay
the Holder cash equal to such fraction multiplied by the price at which this
Note converts.

 

(d)                 Interest Accrual. If this Note is converted pursuant to
Section 2(a), all interest on this Note shall be deemed to have stopped accruing
as of a date selected by the Company that is up to ten (10) days prior to the
signing of the definitive agreement for the Change of Control.

 

3.                  Representations and Warranties.

 

(a)                Representations and Warranties of the Company. The Company
hereby represents and warrants to the Holder as of the date the first Note was
issued as follows:

 

(i)               Organization, Good Standing and Qualification. The Company is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has the requisite
company power to own and operate its properties and assets and to carry on its
business as now conducted and as proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
limited liability company in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or its business (a
“Material Adverse Effect”).

 

(ii)               Company Power. The Company has all requisite corporate power
to issue this Note and to carry out and perform its obligations under this Note.
The Company’s Manager or Managers (the “Manager”) has approved the issuance of
this Note based upon a reasonable belief that the issuance of this Note is
appropriate for the Company after reasonable inquiry concerning the Company’s
financing objectives and financial situation.

 

2. 

 

 

(iii)            Authorization. All company action on the part of the Company,
the Manager and the Company’s members necessary for the issuance and delivery of
this Note has been taken. This Note constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency, the relief of debtors
and, with respect to rights to indemnity, subject to federal and state
securities laws. Any securities issued upon conversion of this Note (the
“Conversion Securities”), when issued in compliance with the provisions of this
Note, will be validly issued, fully paid, nonassessable, free of any liens or
encumbrances and issued in compliance with all applicable federal and securities
laws.

 

(iv)           Governmental Consents. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any governmental authority required on the part of the Company
in connection with issuance of this Note has been obtained.

 

(v)              Compliance with Laws. To its knowledge, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties, which
violation of which would have a Material Adverse Effect.

 

(vi)             Compliance with Other Instruments. The Company is not in
violation or default of any term of its certificate of organization or Operating
Agreement, or of any provision of any mortgage, indenture or contract to which
it is a party and by which it is bound or of any judgment, decree, order or
writ, other than such violation(s) that would not have a Material Adverse
Effect. The execution, delivery and performance of this Note will not result in
any such violation or be in conflict with, or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, decree, order or writ or an event that results in the
creation of any lien, charge or encumbrance upon any assets of the Company or
the suspension, revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization or approval applicable to the Company,
its business or operations or any of its assets or properties. Without limiting
the foregoing, the Company has obtained all waivers reasonably necessary with
respect to any preemptive rights, rights of first refusal or similar rights,
including any notice or offering periods provided for as part of any such
rights, in order for the Company to consummate the transactions contemplated
hereunder without any third party obtaining any rights to cause the Company to
offer or issue any securities of the Company as a result of the consummation of
the transactions contemplated hereunder.

 

(vii)           No “Bad Actor” Disqualification. The Company has exercised
reasonable care to determine whether any Company Covered Person (as defined
below) is subject to any of the “bad actor” disqualifications described in Rule
506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under
the Act (“Disqualification Events”). To the Company’s knowledge, no Company
Covered Person is subject to a Disqualification Event. The Company has complied,
to the extent required, with any disclosure obligations under Rule 506(e) under
the Act. For purposes of this Note, “Company Covered Persons” are those persons
specified in Rule 506(d)(1) under the Act; provided, however, that Company
Covered Persons do not include (a) any Holder, or (b) any person or entity that
is deemed to be an affiliated issuer of the Company solely as a result of the
relationship between the Company and any Holder.

  

(viii)         Offering. Assuming the accuracy of the representations and
warranties of the Holder contained in subsection (b) below, the offer, issue,
and sale of this Note and the Conversion Securities (collectively, the
“Securities”) are and will be exempt from the registration and prospectus
delivery requirements of the Act, and have been registered or qualified (or are
exempt from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.

 

3. 

 

 

(ix)           Use of Proceeds. The Company shall use the proceeds of this Note
solely for the operations of its business and costs incurred therein, and not
for any personal, family or household purpose.

 

(b)                Representations and Warranties of the Holder. The Holder
hereby represents and warrants to the Company as of the date hereof as follows:

 

(i)                 Purchase for Own Account. The Holder is acquiring the
Securities solely for the Holder’s own account and beneficial interest for
investment and not for sale or with a view to distribution of the Securities or
any part thereof, has no present intention of selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise
distributing the same, and does not presently have reason to anticipate a change
in such intention.

 

(ii)               Information and Sophistication. Without lessening or
obviating the representations and warranties of the Company set forth in
subsection (a) above, the Holder hereby: (A) acknowledges that the Holder has
received all the information the Holder has requested from the Company and the
Holder considers necessary or appropriate for deciding whether to acquire the
Securities, (B) represents that the Holder has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Securities and to obtain any additional
information necessary to verify the accuracy of the information given the Holder
and (C) further represents that the Holder has such knowledge and experience in
financial and business matters that the Holder is capable of evaluating the
merits and risk of this investment.

 

(iii)            Ability to Bear Economic Risk. The Holder acknowledges that
investment in the Securities involves a high degree of risk, and represents that
the Holder is able, without materially impairing the Holder’s financial
condition, to hold the Securities for an indefinite period of time and to suffer
a complete loss of the Holder’s investment.

 

(iv)             Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Holder further agrees not to make any
disposition of all or any portion of the Securities unless and until:

 

(1)               There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or

 

(2)               The Holder shall have notified the Company of the proposed
disposition and furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and if reasonably requested
by the Company, the Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration under the Act or any applicable state securities laws;
provided that no such opinion shall be required for dispositions in compliance
with Rule 144 under the Act, except in unusual circumstances.

 

(3)               Notwithstanding the provisions of paragraphs (1) and (2)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Holder to a partner (or retired partner) or member (or
retired member) of the Holder in accordance with partnership or limited
liability company interests, or transfers by gift, will or intestate succession
to any spouse or lineal descendants or ancestors, if all transferees agree in
writing to be subject to the terms hereof to the same extent as if they were the
Holders hereunder.

 

4. 

 

 

(v)               Accredited Investor Status. The Holder is an “accredited
investor” as such term is defined in Rule 501 under the Act.

 

(vi)             No “Bad Actor” Disqualification. The Holder represents and
warrants that neither (A) the Holder nor (B) any entity that controls the Holder
or is under the control of, or under common control with, the Holder, is subject
to any Disqualification Event, except for Disqualification Events covered by
Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Act and disclosed in writing in
reasonable detail to the Company. The Holder represents that the Holder has
exercised reasonable care to determine the accuracy of the representation made
by the Holder in this paragraph, and agrees to notify the Company if the Holder
becomes aware of any fact that makes the representation given by the Holder
hereunder inaccurate.

 

(vii)           Foreign Investors. If the Holder is not a United States person
(as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended (the “Code”)), the Holder hereby represents that he, she or it has
satisfied itself as to the full observance of the laws of the Holder’s
jurisdiction in connection with any invitation to subscribe for the Securities
or any use of this Note, including (A) the legal requirements within the
Holder’s jurisdiction for the purchase of the Securities, (B) any foreign
exchange restrictions applicable to such purchase, (C) any governmental or other
consents that may need to be obtained, and (D) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Securities. The Holder’s subscription, payment for and
continued beneficial ownership of the Securities will not violate any applicable
securities or other laws of the Holder’s jurisdiction.

 

(viii)         Forward-Looking Statements. With respect to any forecasts,
projections of results and other forward-looking statements and information
provided to the Holder, the Holder acknowledges that such statements were
prepared based upon assumptions deemed reasonable by the Company at the time of
preparation. There is no assurance that such statements will prove accurate, and
the Company has no obligation to update such statements.

 

4.                  Events of Default.

 

(a)               If there shall be any Event of Default (as defined below)
hereunder, at the option and upon the declaration of the Holder and upon written
notice to the Company (which election and notice shall not be required in the
case of an Event of Default under subsection (ii) or (iii) below), this Note
shall accelerate and all principal and unpaid accrued interest shall become due
and payable. The occurrence of any one or more of the following shall constitute
an “Event of Default”:

 

(i)                 Failure to pay all outstanding principal plus accrued
interest on the Maturity Date;

 

(ii)               The Company files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; or

 

(iii)             An involuntary petition is filed against the Company (unless
such petition is dismissed or discharged within sixty (60) days under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee
or assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of the
Company).

 

5. 

 

 

(b)                In the event of any Event of Default hereunder, the Company
shall pay all reasonable attorneys’ fees and court costs incurred by the Holder
in enforcing and collecting this Note.

 

5.                  Miscellaneous Provisions.

 

(a)               Waivers. The Company hereby waives demand, notice,
presentment, protest and notice of dishonor.

 

(b)                Further Assurances. The Holder agrees and covenants that at
any time and from time to time the Holder will promptly execute and deliver to
the Company such further instruments and documents and take such further action
as the Company may reasonably require in order to carry out the full intent and
purpose of this Note, to join the Company’s Operating Agreement and to comply
with state or federal securities laws or other regulatory approvals.

 

(c)                Transfers of Notes. This Note may be transferred only upon
its surrender to the Company for registration of transfer, duly endorsed, or
accompanied by a duly executed written instrument of transfer in form
satisfactory to the Company. Thereupon, this Note shall be reissued to, and
registered in the name of, the transferee, or a new Note for like principal
amount and interest shall be issued to, and registered in the name of, the
transferee. Interest and principal shall be paid solely to the registered holder
of this Note. Such payment shall constitute full discharge of the Company’s
obligation to pay such interest and principal. Notwithstanding, nothing in this
Note shall be construed to prohibit the Holder from transferring this Note to a
trust.

 

(d)                Market Standoff. To the extent requested by the Company or an
underwriter of securities of the Company, the Holder and any permitted
transferee thereof shall not, without the prior written consent of the managing
underwriters in the IPO (as hereafter defined), offer, sell, make any short sale
of, grant or sell any option for the purchase of, lend, pledge, otherwise
transfer or dispose of (directly or indirectly), enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership (whether any such transaction is described above or is
to be settled by delivery of Securities or other securities, in cash, or
otherwise), any Securities or other units of the Company then owned by the
Holder or any transferee thereof, or enter into an agreement to do any of the
foregoing, for up to 180 days following the effective date of the registration
statement of the initial public offering of the Company (the “IPO”) filed under
the Securities Act. For purposes of this paragraph, “Company” includes any
wholly owned subsidiary of the Company into which the Company merges or
consolidates. The Company may place restrictive legends on the certificates
representing the units or shares subject to this paragraph and may impose stop
transfer instructions with respect to the Securities of the Holder and any
transferee thereof (and the units or shares or securities of every other person
subject to the foregoing restriction) until the end of such period. The Holder
and any transferee thereof shall enter into any agreement reasonably required by
the underwriters to the IPO to implement the foregoing within any reasonable
timeframe so requested. The underwriters for any IPO are intended third party
beneficiaries of this paragraph and shall have the right, power and authority to
enforce the provisions of this paragraph as though they were parties hereto.

 

(e)                Amendment and Waiver. Any term of this Note may be amended or
waived with the written consent of the Company and the Holder.

 

6. 

 

 

(f)                 Governing Law. This Note shall be governed by and construed
under the laws of the State of Delaware, as applied to agreements among Delaware
residents, made and to be performed entirely within the State of Delaware,
without giving effect to conflicts of laws principles.

 

(g)               Binding Agreement. The terms and conditions of this Note shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Note, expressed or implied, is intended
to confer upon any third party any rights, remedies, obligations or liabilities
under or by reason of this Note, except as expressly provided in this Note.

 

(h)               Counterparts; Manner of Delivery. This Note may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic
Transactions Act or other applicable law) or other transmission method and any
counterpart so delivered shall be deemed to have been duly and validly delivered
and be valid and effective for all purposes.

 

(i)                 Titles and Subtitles. The titles and subtitles used in this
Note are used for convenience only and are not to be considered in construing or
interpreting this Note.

 

(j)                 Notices. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified, (ii) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications to a party
shall be sent to the party’s address set forth on the signature page hereto or
at such other address(es) as such party may designate by ten (10) days’ advance
written notice to the other party hereto.

 

(k)               Expenses. The Company and the Holder shall each bear its
respective expenses and legal fees incurred with respect to the negotiation,
execution and delivery of this Note and the transactions contemplated herein.

 

(l)                 Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to the Holder, upon any breach
or default of the Company under this Note shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach or default,
or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by the Holder of any breach or default under this Note, or
any waiver by the Holder of any provisions or conditions of this Note, must be
in writing and shall be effective only to the extent specifically set forth in
writing and that all remedies, either under this Note, or by law or otherwise
afforded to the Holder, shall be cumulative and not alternative. This Note shall
be void and of no force or effect in the event that the Holder fails to remit
the full principal amount to the Company within five calendar days of the date
of this Note.

 

(m)               Entire Agreement. This Note constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof, and no party shall be liable or bound to any other party in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein.

 

7. 

 

 

(n)               Exculpation among Holders. The Holder acknowledges that the
Holder is not relying on any person, firm or corporation, or other entity or
person other than the Company and its officers and Manager, in making its
investment or decision to invest in the Company.

 

(o)                Senior Indebtedness. The indebtedness evidenced by this Note
is subordinated in right of payment to the prior payment in full of any Senior
Indebtedness in existence on the date of this Note or hereafter incurred.
“Senior Indebtedness” shall mean, unless expressly subordinated to or made on a
parity with the amounts due under this Note, all amounts due in connection with
(i) indebtedness of the Company to banks or other lending institutions regularly
engaged in the business of lending money (excluding venture capital, investment
banking or similar institutions and their affiliates, which sometimes engage in
lending activities but which are primarily engaged in investments in equity
securities), and (ii) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for such Senior Indebtedness, or any
indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor.

 

(p)               Broker’s Fees. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker’s or
finder’s fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this subsection being untrue.

 

[Signature page follows]

 

8. 

 

 

The parties have executed this Convertible Promissory Note as of the date first
noted above.

 

  VALQARI LLC         By: /s/ Ryan Walsh    

Ryan Walsh

        AGEAGLE AERIAL SYSTEMS INC.         By: /s/ J. Michael Drozd    

J. Michael Drozd

 

SIGNATURE PAGE TO
VALQARI LLC
CONVERTIBLEPROMISSORY NOTE