Exhibit 10.15

 

 

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

 

 

RED CAT HOLDINGS, INC.

Convertible Note

Issuance Date: ______________, 2020 Original Principal Amount: $________

 

FOR VALUE RECEIVED, RED CAT HOLDINGS, INC., a Nevada corporation (the
"Company"), hereby promises to pay to or his registered assign (the "Holder"),
the amount set out above as the Original Principal Amount when due, whether upon
the Maturity Date (as defined below), acceleration or otherwise (in each case in
accordance with the terms hereof) and to pay interest ("Interest") on the
outstanding Principal Amount at the Interest Rate (as defined below) from the
date set out above as the Issuance Date (the "Issuance Date") until the same
becomes due and payable, upon the Maturity Date, acceleration or conversion (in
each case in accordance with the terms hereof).

(1) GENERAL TERMS

(a) Payment of Principal. The "Maturity Date" shall be two years from the
Issuance Date, unless an Event of Default (as defined below) shall have occurred
and be continuing.

(b) Interest. Interest shall accrue at a rate of 12% (“Interest Rate”) per annum
and shall be applied to the outstanding Original Principal Amount. Interest
hereunder shall be paid on the Maturity Date (or sooner as provided herein) to
the Holder or its assignee in whose name this Note is registered on the records
of the Company regarding registration and transfers of Notes in cash, or in
shares of common stock of the Company (the “Common Stock”) at the Conversion
Price (as defined below).

(c) Security. This Note shall not be secured by any collateral or any assets
pledged to the Holder.

(i) Prepayment. Notwithstanding anything contained herein to the contrary, the
Company shall have the right to prepay all or any portion of the outstanding
Principal Amount and accrued interest thereon, without penalty or premium, upon
no less than ten business days’ prior notice to the Holder provided that (i)
such amount must be paid in cash on the next business day following such 10
business day notice period, and (ii) the Holder may still convert this Note
pursuant to the terms hereof at all times until such prepayment amount has been
received in full.

(2) TERMS OF FUTURE FINANCINGS.

(a) So long as this Note is outstanding, upon any issuance by the Company of any
security, or an amendment to a security that was issued before the date hereof,
with any term that the Holder reasonably believes is more favorable to the
holder of such security or with a term in favor of the holder of such security
that the Holder reasonably believes was not similarly provided to the Holder,
(I) the Company shall notify the Holder of such additional or more favorable
term within one (1) business day of the issuance and/or amendment (as
applicable) of the respective security, and (ii) such term, at Holder’s option,
shall become a part of this Note regardless of whether the Company has complied
with the notification provision of this section. The types of terms contained in
another security that may be more favorable to the holder of such security
include, but are not limited to, terms addressing conversion discounts,
prepayment rate, conversion lookback periods, interest rates, and original issue
discounts. Notwithstanding the foregoing, the issuance of any security which is
an Exempt Issuance (as defined below) shall not entitle to the Holder to such
more favorable term.

(3) CONVERSION OF NOTE. This Note shall be convertible into shares of the
Company's Common Stock, on the terms and conditions set forth in this Section 3.

(i) "Conversion Amount" means the portion of the Original Principal Amount and
interest to be converted.

(ii) "Conversion Price" shall be the lower of (a) $1.00, if the conversion
herein occurs prior a Qualified Offering, or (b) a 25% discount of the price per
share of Common Stock offered in the Qualified Offering, if the conversion
herein occurs simultaneous with the Qualified Offering.

(iii) “Exempt Issuance” shall mean the issuance of (a) shares of Common Stock or
options to employees, officers or directors of the Company pursuant to any stock
or option plan duly adopted for such purpose, (b) securities upon the exercise
or exchange of or conversion of any Shares issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, unless an amendment
thereto effects or changes the conversion price thereof or provides the holder
thereof with a term which is more favorable than the term on effect as of the
date hereof (in which case such amendment would not be considered an Exempt
Issuance), and (c) securities issued pursuant to acquisitions or strategic
transactions approved by the Board of Directors of the Company.

(iv) “Qualified Offering” shall mean an offering of Common Stock (and other
securities potentially) resulting in the listing for trading of the Common Stock
on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market or the New York Stock Exchange (or any successors to
any of the foregoing).

(v) “VWAP” means the thirty (30) day volume weighted average of the closing
price of a share of Common Stock as listed or quoted on the market in which the
shares of the Company are then traded or listed.

(a) Optional Conversion. The Holder may, in its sole discretion, determine to
convert all or part of the outstanding Principal Amount due hereunder and any
accrued interest thereon into fully paid and nonassessable shares of Common
Stock at the Conversion Price. The number of shares of Common Stock issuable
upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be
equal to the quotient of dividing the Conversion Amount by the Conversion Price.
The Company shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
transfer agent fees, legal fees, costs and any other fees or costs that may be
incurred or charged in connection with the issuance of shares of the Company’s
Common Stock to the Holder arising out of or relating to the conversion of this
Note; provided, however, that the Holder shall pay any transfer taxes.

(b) Mandatory Conversion. Simultaneous with the consummation of a Qualified
Offering, the outstanding Principal Amount due hereunder and all accrued
interest hereon shall automatically be converted into fully paid and
nonassessable shares of Common Stock at the Conversion Price. The number of
shares of Common Stock issuable upon conversion of any Conversion Amount
pursuant to this Section 3(b) shall be equal to the quotient of dividing the
Conversion Amount by the Conversion Price. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. If the issuance would
result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up to the nearest whole
share. The Company shall pay any and all transfer agent fees, legal fees, costs
and any other fees or costs that may be incurred or charged in connection with
the issuance of shares of the Company’s Common Stock to the Holder arising out
of or relating to the conversion of this Note; provided, however, that the
Holder shall pay any transfer taxes.

(c) Conversion Notice.

(i) To convert any portion of this Note into shares of Common Stock on any date
(a "Conversion Date") pursuant to Section 3(a), the Holder shall (A) transmit by
email, facsimile (or otherwise deliver), for receipt on or prior to 5:30 p.m.,
Pacific Time, on such date, a copy of an executed notice of conversion in the
form attached hereto as Exhibit A (the "Conversion Notice") to the Company. On
or before the tenth business day following the date of receipt of a Conversion
Notice (the "Share Delivery Date"), the Company shall (A) if legends are not
required to be placed on certificates of Common Stock pursuant to the then
existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and
provided that the transfer agent for the Company is participating in the
Depository Trust Company's ("DTC") Fast Automated Securities Transfer Program,
credit such aggregate number of shares of Common Stock to which the Holder shall
be entitled to the Holder's or its designee's balance account with DTC through
its Deposit Withdrawal Agent Commission system or (B) if a restrictive legend is
required to be placed on the certificates of Common Stock, issue and deliver to
the address as specified in the Conversion Notice, a certificate, registered in
the name of the Holder or its designee, for the number of shares of Common Stock
to which the Holder shall be entitled, with a restrictive legend imposed
thereon.

(ii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
conversion of any portion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Company
unless (A) the full Conversion Amount represented by this Note is being
converted at the option of the Holder or (B) the Holder has provided the Company
with prior written notice (which notice may be included in a Conversion Notice)
requesting reissuance of this Note upon physical surrender of this Note. The
Holder and the Company shall maintain records showing the Principal and Interest
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon conversion.

(d) Limitations on Conversions or Trading.

(i) Beneficial Ownership. The Company shall not effect any conversions of this
Note and the Holder shall not have the right to convert any portion of this Note
or receive shares of Common Stock as payment of interest hereunder to the extent
that after giving effect to such conversion or receipt of such interest payment,
the Holder, together with any affiliate thereof, would beneficially own (as
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules promulgated thereunder) in excess of 9.99% of
the number of shares of Common Stock outstanding immediately after giving effect
to such conversion or receipt of shares as payment of interest. Since the Holder
will not be obligated to report to the Company the number of shares of Common
Stock it may hold at the time of a conversion hereunder, unless the conversion
at issue would result in the issuance of shares of Common Stock in excess of
9.99% of the then outstanding shares of Common Stock without regard to any other
shares which may be beneficially owned by the Holder or an affiliate thereof,
the Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of the
principal amount of this Note is convertible shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Conversion Notice for a
principal amount of this Note that, without regard to any other shares that the
Holder or its affiliates may beneficially own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the conversion for the maximum principal amount
permitted to be converted on such Conversion Date in accordance with Section
3(a) and, any principal amount tendered for conversion in excess of the
permitted amount hereunder shall remain outstanding under this Note. The
provisions of this Section may be waived by Holder upon written notification to
the Company.

(e) Dilutive Issuance. If the Company, at any time while this Note is
outstanding, issues, sells or grants (or has issued, sold or granted as of the
issue date, as the case may be) any option to purchase, or sells or grants any
right to reprice, or otherwise disposes of, or issues (or has sold or issued, as
the case may be, or announces any sale, grant of any option to purchase or other
disposition), any Common Stock or other securities convertible into, exercisable
for, or that otherwise entitle any person or entity the right to acquire, shares
of Common Stock, in each or any case at an effective price per share that is
lower than the then Conversion Price (such lower price, the “Base Conversion
Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed
that if the holder of the Common Stock or other securities so issued shall at
any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, or exchange prices or otherwise, due to warrants, options
or rights per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per share that
is lower than the Conversion Price, such issuance shall be deemed to have
occurred for less than the Conversion Price on such date of the Dilutive
Issuance), then the Conversion Price shall be reduced, at the option of the
Holder, to a price equal to the Base Conversion Price. If the Company enters
into a variable rate transaction the Company shall be deemed to have issued
Common Stock pursuant to this provision at the lowest possible price per share
at which such securities could be issued in connection with such variable rate
transaction. Such adjustment shall be made whenever such Common Stock or other
securities are issued. Notwithstanding the foregoing, no adjustment will be made
under this Section 3(e) in respect of an Exempt Issuance. In the event of an
issuance of securities involving multiple tranches or closings, any adjustment
pursuant to this Section 3(e) shall be calculated as if all such securities were
issued at the initial closing.

(f) Other Provisions.

(i) The Company shall at all times reserve and keep available out of its
authorized Common Stock the full number of shares of Common Stock issuable upon
conversion of all outstanding amounts under this Note.

(ii) All calculations under this Section 3 shall be rounded off to the nearest
$0.001.

(iii) Nothing herein shall limit a Holder's right to pursue actual damages or
declare an Event of Default pursuant to Section 2 herein for the Company's
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief,
in each case without the need to post a bond or provide other security. The
exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

(4) EVENTS OF DEFAULT.

(a) An “Event of Default”, wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

(i) The Company's failure to pay to the Holder any amount of the then
outstanding Original Principal Amount or Interest when and as due under this
Note;

(ii) The Company or any subsidiary of the Company shall commence, or there shall
be commenced against the Company or any subsidiary of the Company under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Company or any subsidiary of the Company commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or any
subsidiary of the Company or there is commenced against the Company or any
subsidiary of the Company any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 business days; or the Company or
any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
the Company or any subsidiary of the Company suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 61 business days; or the Company or any subsidiary of the Company
makes a general assignment for the benefit of creditors; or the Company or any
subsidiary of the Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Company or any subsidiary of the Company shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Company or any subsidiary of the Company shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary of the Company for the purpose of effecting any of the
foregoing;

(iii) The Company shall default in any of its obligations under this Note;

(iv) That upon any event of default (as defined herein) after the Issue Date,
the Conversion Price shall equal the lower of (I) the VWAP, if the conversion
herein occurs prior a Qualified Offering, or (ii) sixty percent (65%) multiplied
by the lowest closing price of the Common Stock during the twenty (20)
consecutive trading day period immediately preceding the date of the respective
conversion (the “Alternate Conversion Price”);

(v) The Company (I) fails to issue Conversion Shares to the Holder (or announces
or threatens in writing that it will not honor its obligation to do so) upon
exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note, (ii) fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any certificate for
the Conversion Shares issuable to the Holder upon conversion of or otherwise
pursuant to this Note as and when required by this Note, (iii) reserve the
reserved amount at all times, or (iii) the Company directs its transfer agent
not to transfer or delays, impairs, and/or hinders its transfer agent in
transferring (or issuing) (electronically or in certificated form) any
certificate for the Conversion Shares issuable to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this Note, or fails
to remove (or directs its transfer agent not to remove or impairs, delays,
and/or hinders its transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any certificate
for any Conversion Shares issued to the Holder upon conversion of or otherwise
pursuant to this Note as and when required by this Note (or makes any written
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for two (2) Trading Days after
the Holder shall have delivered a Notice of Conversion. It is an obligation of
the Company to remain current in its obligations to its transfer agent. It shall
be an Event of Default of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its transfer
agent. If at the option of the Holder, the Holder advances any funds to the
Borrower’s transfer agent in order to process a conversion, such advanced funds
shall be paid by the Company to the Holder within forty-eight (48) hours of a
demand from the Holder;

(vi) The Company shall fail to maintain the listing of the Common Stock on at
least one of the Over the Counter Bulletin Board, the OTCQB Market, any level of
the OTC Markets, or any level of the Nasdaq Stock Market or the New York Stock
Exchange (including the NYSE American);

(vii) At any time after the Issue Date, the Borrower shall fail to comply with
the reporting requirements of the 1934 Act and/or the Borrower shall cease to be
subject to the reporting requirements of the 1934 Act;

(viii) The failure by the Company to maintain any material intellectual property
rights, personal, real property or other assets which are necessary to conduct
its business (whether now or in the future);

(ix) The restatement of any financial statements filed by the Borrower with the
SEC for any date or period from two years prior to the Issue Date of this Note
and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a
material adverse effect on the rights of the Holder with respect to this Note or
the Purchase Agreement;

(x) In the event that the Company proposes to replace its transfer agent and the
Company fails to provide, prior to the effective date of such replacement, a
fully executed irrevocable transfer agent letter (including but not limited to a
provision to irrevocably reserve shares of Common Stock in the reserved amount)
signed by the successor transfer agent and the Company;

(xi) The DTC places a “chill” (i.e. a restriction placed by DTC on one or more
of DTC’s services, such as limiting a DTC participant’s ability to make a
deposit or withdrawal of the security at DTC) on any of the Borrower’s
securities;

(xii) In addition to the Event of Default in this section, the Common Stock is
otherwise not eligible for trading through the DTC’s Fast Automated Securities
Transfer or Deposit/Withdrawal at Custodian programs; and

(xiii) If, at any time on or after the date which is six (6) months after the
Issue Date, except due to the Holder’s actions or inactions, the Holder is
unable to (I) obtain a standard “144 legal opinion letter” from an attorney
reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective
clearing firm), and the Borrower’s transfer agent in order to facilitate the
Holder’s conversion of any portion of the Note into free trading shares of the
Borrower’s Common Stock pursuant to Rule 144, and/or (ii) thereupon deposit such
shares into the Holder’s brokerage account.

(b) Upon notice by Holder and during the continuation of any Event of Default
specified in this section, this Note shall become immediately due and payable
and the Company shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount (the “Default Amount”) equal to the principal amount then
outstanding plus accrued interest (including any default interest) through the
date of full repayment multiplied by 130%. Holder may, in its sole discretion,
determine to accept payment part in Common Stock and part in cash. Upon an
uncured Event of Default, all amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived by the Company, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity, including, without limitation, those set forth herein.

(5) REISSUANCE OF THIS NOTE.

(a) Assignability. This Note will be binding upon the Company and its successors
and will inure to the benefit of the Holder and its successors and assigns and
may be assigned by the Holder with prior written consent of the Company, which
consent shall not be unreasonably withheld.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note representing the
outstanding Principal hereunder.

(6) APPLICABLE LAW AND VENUE. This Note 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 the Douglas
County, Nevada, and expressly consent to the jurisdiction and venue of the
Supreme Court of Nevada, sitting in Douglas County for the adjudication of any
civil action asserted pursuant to this paragraph. The Company and the Holder
waive trial by jury. 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 Note 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 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.

(7) WAIVER. Any waiver by the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note. The failure of
the Holder to insist upon strict adherence to any term of this Note on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Note. Any waiver must be in writing.

 

[Remainder of Page Intentionally Omitted; Signature Page Follows]

   

 

IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly
executed by a duly authorized officer as of the date set forth above.

 

Red Cat Holdings, Inc.

 

By: _______________________________

Jeffrey M. Thompson

President and Chief Executive Officer

   

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

 

Red Cat Holdings, Inc.

1607 Ponce De Leon Avenue

Suite 407

San Juan, Puerto Rico 00909

Attn: Jeffrey M. Thompson, President

 

 

 

The undersigned hereby elects to convert [all] [a portion] of the $ [
]Convertible Note issued to ____________ on __________, 2020 into shares of
Common Stock of Red Cat Holdings, Inc. according to the conditions set forth in
such Note as of the date written below.

 

By accepting this notice of conversion, you are acknowledging that the number of
shares to be delivered represents less than 10% (ten percent) of the common
stock outstanding. If the number of shares to be delivered represents more than
9.99% of the common stock outstanding, this conversion notice shall immediately
automatically extinguish and the Holder must be immediately notified.

 

 

 

Date of Conversion: _____________________

Conversion Amount: _____________________

Conversion Price: _______________________

Shares to be Delivered: __________________

 

EIN:

 

By:________________________________

Name:

Title: