Document:

Exhibit 10.12

 

NEITHER
THIS WARRANT
NOR ANY
OF THE SECURITIES
ISSUABLE UPON EXERCISE
OF THIS WARRANT
HAVE BEEN
REGISTERED UNDER
THE SECURITIES
ACT OF 1933
OR UNDER THE
SECURITIES LAWS
OF ANY
OTHER JURISDICTION. BY
ACQUIRING THIS WARRANT,
HOLDER AGREES TO
NOT SELL OR OTHERWISE DISPOSE
OF THIS WARRANT OR
THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS WARRANT WITHOUT
REGISTRATION OR THE APPLICABILITY
OF AN EXEMPTION FROM REGISTRATION
UNDER THE AFORESAID
ACTS, AND
THE RULES
AND REGULATIONS THEREUNDER.

 

WARRANT
TO PURCHASE COMMON STOCK

 

Number
of Shares of Common Stock:  1,750,000

Date of Issuance:
 December 22, 2015 (“Issuance
Date”)

 

THIS
CERTIFIES THAT,
for value received,
Slipstream Communications, LLC (including
any permitted and
registered assigns, the
“Holder”), is entitled to
purchase from Creative Realities,
Inc., a Minnesota corporation (the
“Company”), up to 1,750,000
shares of Common Stock of the Company
(the “Warrant Shares”)
at the Exercise Price hereunder
then in effect.
This Warrant to Purchase Common
Stock (this “Warrant”)
is issued by the Company in connection
with the Company’s offer and sale
to the Holder of a Secured Convertible
Promissory Note pursuant
to the terms and conditions of
a Securities Purchase Agreement by and
among the Company, Holder and
other purchasers of such notes,
dated of even date herewith
(the “Securities Purchase
Agreement,” and such notes
sold thereunder, the “Notes”).
For purposes of this Warrant,
the term “Exercise Price”
shall mean $0.28 per share, subject
to adjustment as
provided herein, and the term “Exercise
Period” shall mean the period
commencing on the Issuance Date
and ending on 5:00 p.m. New York time
on the five-year anniversary of
the date of this Warrant.

 

1.                 
EXERCISE OF WARRANT.

 

(a)               
Mechanics of Exercise. Subject
to the terms and conditions hereof,
including but not limited
to the provisions of Section 1(c) below,
the rights represented by this Warrant
may be exercised
in whole or in part at any time
or times during the Exercise Period
by delivery of a written notice, in the
form attached hereto
as Exhibit A (the “Exercise
Notice”),
of the Holder’s election
to exercise
this Warrant. The
Holder shall not be required
to deliver the original Warrant in
order to effect
an exercise hereunder. Execution
and delivery of the Exercise Notice with
respect to less than all of the
Warrant Shares shall have
the same effect as cancellation of the
original Warrant and issuance
of a new Warrant
evidencing the right
to purchase the remaining number
of Warrant Shares. On
or before the third Trading Day (the “Warrant
Share Delivery
Date”) following the date on which the Company
shall have received the Exercise
Notice, and upon receipt by the
Company of (i) payment
to the Company of an amount
equal to the applicable Exercise
Price multiplied by the number
of Warrant Shares as to
which this Warrant is being exercised
(the “Aggregate Exercise Price”
and together with the Exercise
Notice, the “Exercise
Delivery Documents”)
in cash or by wire transfer of immediately
available funds or (ii) notification
from the Holder that this
Warrant is being exercised pursuant
to a Cashless Exercise, as defined
below, the Company shall
issue and dispatch by overnight courier
to the address as
specified in the Exercise Notice,
a certificate, registered
in the Company’s share register
in the name of the Holder

    	 

    	 

    

 

or its designee, for
the number of shares of Common Stock
to which the Holder is entitled pursuant
to such exercise (or credit
the Holder’s account through
an electronic delivery of Common
Stock through the DWAC
system of the Depository Trust Company,
if requested). Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed
for all corporate purposes to have become
the holder of record of the Warrant
Shares with respect to which this
Warrant has been
exercised, irrespective
of the date of delivery of
the certificates evidencing such
Warrant Shares. If this Warrant
is submitted in
connection with any exercise pursuant
to Section 1(c) and
the number of Warrant Shares
represented by this Warrant
submitted for exercise is greater than
the number of Warrant Shares being
acquired upon an exercise,
then the Company shall
as soon as practicable, and in no
event later than three business days
after any exercise and at its own
expense, issue a new Warrant
representing the right to purchase the
number of Warrant Shares purchasable
immediately prior to
such exercise under this Warrant,
less the number
of Warrant Shares with respect to which
this Warrant is exercised.

 

(b)              
No Fractional Shares. No
fractional shares shall be issued
upon the exercise of
this Warrant as a consequence
of any adjustment pursuant hereto. All
Warrant Shares (including
fractions) issuable upon exercise
of this Warrant may be aggregated for
purposes of determining
whether the exercise would result
in the issuance of
any fractional share. If, after
aggregation, the exercise
would result in
the issuance of a fractional
share, the Company shall, in lieu of
issuance of any fractional
share, pay the Holder otherwise
entitled to such fraction a sum
in cash equal to the product
resulting from multiplying the
then current fair
market value of a Warrant Share by such
fraction.

 

(c)               
Cashless Exercise.
The Holder may,
in its sole discretion, exercise this Warrant
in whole or in part and, in lieu
of making the cash payment
otherwise contemplated to be made
to the Company upon such exercise
in payment of the Aggregate Exercise
Price, elect instead to receive upon
such exercise the “Net Number”
of shares of Common Stock determined
according to the following
formula (a “Cashless Exercise”):

 

Net Number
= (A x B) - (A x C)

                                      B

 

For purposes of the
foregoing formula:

 

A = 
the total number of
shares with respect to which this
Warrant is then
being exercised.

 

B = 
the Weighted Average Price of the shares
of Common Stock for
the five consecutive Trading Days
ending on the date immediately preceding
the date of the Exercise Notice.

 

C = 
the Exercise Price then in
effect for the applicable
Warrant Shares at the
time of such exercise.

 

(d)              
Compensation for Buy-In on
Failure to Timely Deliver Warrant
Shares. In addition to any
other rights available to the Holder,
if the Company fails to
deliver (or cause its
transfer agent to deliver)
to the Holder the Warrant
Shares pursuant to
an exercise on or before the Warrant
Share Delivery Date, and if after
such date the Holder
is required by its
broker to purchase (in
an open-

    	 

    	 

    

 

market
transaction or otherwise), or the Holder’s
brokerage firm otherwise purchases, shares
of Common Stock to deliver
in satisfaction of a sale by the Holder
of the Warrant Shares which the
Holder anticipated receiving upon
such exercise (a “Buy-In”),
then the Company
shall (A) pay in cash to the
Holder the amount, if any, by which (x) the Holder’s
total purchase price (including brokerage
commissions, if any) for the shares
of Common Stock so purchased
exceeds (y) the amount
obtained by multiplying (1) the number
of Warrant Shares that the Company
was required to deliver to
the Holder in
connection with the exercise at
issue, times (2) the price at
which the sell
order giving rise to such
purchase obligation was executed,
and (B) at the
option of the Holder, either
reinstate the portion of the
Warrant and equivalent
number of Warrant
Shares for which such exercise
was not honored (in which
case such exercise shall be deemed
rescinded) or deliver to
the Holder the number of shares
of Common Stock that
would have been issued had the Company
timely complied with its exercise and
delivery obligations hereunder. For
example, if the Holder purchases Common
Stock having a total purchase price of $11,000
to cover a Buy-In with respect to
an attempted exercise of shares
of Common Stock with an aggregate sale
price giving rise
to such purchase obligation of $10,000,
under clause (A) of the immediately
preceding sentence the
Company shall be required to pay the
Holder $1,000. The Holder shall provide
the Company written notice indicating
the amount payable
to the Holder in respect of
the Buy-In and,
upon request of the Company, evidence
of the amount of such loss. Nothing herein shall
limit a Holder’s right
to pursue any other remedies
available to it hereunder,
at law or in equity,
including without limitation
a decree of specific performance
or other injunctive relief with respect
to the Company’s failure to timely
deliver shares of Common Stock upon exercise
of the Warrant as
required pursuant to the terms
hereof.

 

(e)               
Beneficial Ownership Restrictions.
Notwithstanding anything to the
contrary in this Warrant,
the Company shall not effect any exercise
of this Warrant, and a Holder shall not
have the right
to exercise any portion of this
Warrant, to the
extent that, after giving
effect to the exercise set
forth on the applicable Exercise
Notice, such Holder (together with such Holder’s
“affiliates,” as such
term is defined in Rule 405 under
the Securities Act of 1933, and any Persons acting
as a group together with such Holder or any
of such Holder’s affiliates)
would beneficially own in
excess of the Beneficial
Ownership Limitation, as defined
below. For purposes of the foregoing
sentence, the number of shares
of Common Stock beneficially owned
by such Holder and its affiliates shall include
the number of shares of Common
Stock issuable upon
exercise of this Warrant
with respect to which
such determination is being made,
but shall exclude the
number of shares of Common Stock
which are issuable upon (i) conversion
of the remaining unexercised portion
of this Warrant beneficially owned by
such Holder or any of its affiliates and (ii) exercise
or conversion of the unexercised or unconverted
portion of any other securities
of the Company that are subject to a
limitation on conversion or exercise
analogous to the limitation
contained herein beneficially owned
by such Holder or any of
its affiliates. Except as set
forth in the preceding sentence, for
purposes of this Section, beneficial
ownership shall be calculated
in accordance with Section 13(d)
of the Securities Exchange Act of
1934 (the “Exchange Act”). To ensure compliance
with this restriction, each Holder
will be deemed to represent
to the Company each time
it delivers an Exercise Notice that
such Exercise Notice has not
violated the restrictions set forth
in this Section 1(e) and the Company
shall have no obligation to verify or confirm
the accuracy of such determination. In
addition, a determination as to any
group status as contemplated
above shall be determined in accordance
with Section 13(d) of the Exchange Act.

 

For purposes of
this Section 1(e), in determining
the number of outstanding shares
of Common Stock, a Holder may
rely on the number of outstanding shares
of Common Stock as stated in

    	 

    	 

    

 

the most
recent of the following: (i)
the Company’s most recent periodic
or annual report filed with
the

U.S. Securities
and Exchange Commission, as
the case may be, (ii) a more recent public
announcement by the Company,
or (iii) a more recent written notice
by the Company or its transfer agent
setting forth the number
of shares of Common Stock outstanding.
Upon the written or oral request of a
Holder, the Company
shall within two Trading Days confirm
to such Holder the number of shares
of Common Stock then outstanding.
In any case, the number of outstanding
shares of Common Stock shall be
determined after giving effect
to the conversion or exercise of securities
of the Company, including
this Warrant, by such Holder
or its affiliates.  The “Beneficial
Ownership Limitation”
shall be 4.99% of the
number of shares of the Common
Stock outstanding immediately after giving
effect to the issuance
of shares of Common Stock
issuable upon exercise of this Warrant.
Upon no fewer than 61 days’
prior notice
to the Company, a Holder may
increase or decrease the Beneficial Ownership
Limitation provisions of
this paragraph, provided that the Beneficial
Ownership Limitation in no event exceeds
9.99% of the number of shares of the Common
Stock outstanding immediately after
giving effect to
the issuance of shares of Common
Stock upon exercise of
this Warrant held by the Holder
and the provisions of this paragraph
shall continue to apply.
Any such increase or decrease will
not be effective until the 61st
day after such notice is
delivered to the Company and shall
only apply to such Holder and no other
Holder. The limitations contained
in this paragraph
shall apply to a successor
Holder of this Warrant.

 

2.                 
ADJUSTMENTS. The Exercise Price and the number
of Warrant Shares shall be
adjusted from time to time
as follows:

 

(a)               
Subdivision or Combination
of Common Stock. If the Company
at any time on or after the date
of the Note subdivides (by any stock
split, stock dividend, recapitalization
or otherwise) one or more
classes of its outstanding shares of
Common Stock into a greater number
of shares, the Exercise Price in effect
immediately prior
to such subdivision will be proportionately
reduced and the number of Warrant Shares
will be proportionately increased.
If the Company at any time on
or after the date of the Note combines
(by combination, reverse stock split
or otherwise) one or
more classes of
its outstanding shares of Common
Stock into a smaller number
of shares, the Exercise Price in effect
immediately prior to such combination
will be proportionately increased and
the number of Warrant Shares will
be proportionately decreased. Any
adjustment under this Section 2(a)
shall become effective
at the close of business
on the date the subdivision or
combination becomes effective.

 

(b)              
Distribution of Assets. If
the Company shall declare or make
any dividend or other distribution of
its assets (or rights to acquire
its assets) to holders of
shares of Common Stock, by
way of return of capital
or otherwise (including without
limitation any distribution of
cash, stock or other securities,
property or options
by way of a dividend, spin
off, reclassification, corporate rearrangement
or other similar transaction)
(a “Distribution”), at
any time after the
issuance of this Warrant, then,
in each such case:

 

(i)                
any Exercise Price in effect
immediately prior to the close
of business on
the record date fixed for the determination
of holders of shares of Common Stock
entitled to receive the
Distribution shall be
reduced, effective as of the close of
business on such record date, to a price
determined by multiplying such
Exercise Price by a fraction
of which (i) the numerator
shall be the Closing Sale Price of the shares
of Common Stock on the Trading Day immediately
preceding such record date
minus the value of the Distribution (as
determined in good faith by the Company’s
Board of

    	 

    	 

    

 

Directors)
applicable to one share of
Common Stock, and (ii) the denominator
shall be the Closing Sale
Price of the shares of Common
Stock on the Trading Day immediately
preceding such record date; and

 

(ii)              
the number of Warrant Shares
shall be increased to a number
of shares equal to the
number of shares of Common Stock
obtainable immediately
prior to the close of business
on the record date fixed for the
determination of holders of shares
of Common Stock entitled
to receive the Distribution multiplied
by the reciprocal of the fraction
set forth in the immediately
preceding clause
(i); provided, however, that in the
event that the Distribution
is of shares of common stock of
a company (other
than the Company)
whose common stock is traded on a national
securities exchange or a national
automated quotation system (“Other
Shares of Common Stock”), then the
Holder may
elect to receive a
warrant to purchase Other
Shares of Common Stock in lieu of
an increase in the number of Warrant
Shares, the terms of which shall be identical to
those of this Warrant, except
that such warrant shall
be exercisable into the number
of shares of Other Shares of Common Stock
that would have been payable
to the Holder pursuant to the
Distribution had the Holder exercised
this Warrant immediately prior
to such record date and with
an aggregate exercise price equal
to the product of
the amount by which the exercise
price of this Warrant was decreased
with respect to
the Distribution pursuant to the
terms of the immediately
preceding clause (i) and
the number of Warrant Shares calculated
in accordance with the first part
of this clause (ii).

 

(c)               
Other Events. If
any event occurs of the type contemplated
by the provisions of this Section
2(a) or (b) but
not expressly provided for
by such provisions (including without
limitation the granting,
on a pro rata basis to the holders
of the Common Stock,
of stock-appreciation rights, phantom
stock units or other shareholder
rights with equity features),
then the Company’s Board of
Directors will make
an appropriate adjustment in
the Exercise Price and the number
of Warrant Shares so as to protect
the rights of
the Holder. For the avoidance of
doubt, the parties agree
this Section
2(c) shall not apply to (i) the
issuance of Common Stock upon the exercise
of options or warrants not granted
to the shareholders of the Company
as a whole, or (ii) the issuance of Common
Stock, stock options, stock-appreciation
rights, restricted
stock units, or other forms
of equity or equity-linked compensation
under the Company’s equity incentive
or purchase plans duly adopted
by a majority of
the non- employee
members of the Board of Directors
of the Company or a committee of
non-employee directors established
for such purpose.

 

(d)              
Weighted-Average Adjustment to Exercise
Price.
If the Company, at any time
while this Warrant is outstanding,
shall issue any Common Stock or
Common Stock Equivalents
entitling any person to acquire
shares of Common Stock, at an effective
price per share less than the
then-current Exercise Price, as adjusted hereunder (any such
issuance, other than an issuance
of Common Stock or Common
Stock Equivalents in respect of
an Exempt
Issuance, being referred
to as a “Dilutive
Issuance”), then the Exercise
Price shall be adjusted in accordance
with the following formula:

 

AEP = EP *
[OS + ((DIS * DIP)/EP)]

(OS + DIS)

 

For purposes of
the foregoing formula:
AEP =Adjusted Exercise Price

 

    	 

    	 

    

EP=Exercise
Price (as in effect immediately
prior to adjustment)

 

OS=Total
number of shares of Common
Stock and Common Stock Equivalents
outstanding immediately prior to
the Dilutive (excluding, however,
Common Stock and Common
Stock Equivalents outstanding on account
of Exempt
Issuances)

 

DIS 
=Total number of shares of
Common Stock and Common Stock
Equivalents issued in the
Dilutive Issuance

 

DIP 
=The per-share price at which
Common Stock or Common Stock Equivalents
were issued in the Dilutive Issuance

 

Any such adjustment shall
be made whenever such Common Stock
or Common Stock Equivalents
are issued; provided, however, that
(i) if an adjustment is made on account
of a Dilutive Issuance of Common
Stock Equivalents, then the
subsequent issuance of actual Common Stock upon conversion
or exercise of such Common Stock Equivalents will not
result in a second
adjustment, and (ii) notwithstanding anything in this
Warrant to the contrary, no adjustments shall
be made under this Section 2(d)
in respect of an Exempt Issuance.  The
Company shall notify the
Holder in writing, no later than
the third Trading Day following any Dilutive
Issuance (other than an Exempt Issuance), indicating therein
the applicable per-share price at
which Common Stock or Common Stock
Equivalents were issued.

 

3.
FUNDAMENTAL TRANSACTIONS.
If, at any time while this Warrant is
outstanding, (i)  
the Company effects any merger
of the Company with or into another
entity and the Company is not the surviving
entity, (ii) the Company effects
any sale of all or
substantially all of its assets
in one or a series of
related transactions, (iii) any
tender offer or exchange offer (whether
by the Company or by another
individual or entity, and approved
by the Company) is completed
pursuant to which holders of
Common Stock are permitted to
tender or exchange their shares of Common
Stock for other securities, cash
or property or (iv) the Company
effects any reclassification of the Common
Stock or any compulsory share
exchange pursuant to which the Common
Stock is effectively converted into
or exchanged for other securities,
cash or property (other than as a result of a
subdivision or combination of
shares of Common Stock covered by
Section 2(a) above) (in any such case,
a “Fundamental Transaction”),
then, upon any subsequent exercise
of this Warrant, the Holder
shall have the right
to receive the number of shares
of Common Stock of the successor or
acquiring corporation or of the
Company and any additional consideration
(the “Alternate Consideration”)
receivable upon or as a result of
such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder
of the number
of shares of Common Stock for
which this Warrant is exercisable
immediately prior to such
event (disregarding any limitation
on exercise contained herein
solely for the purpose of such determination).
For purposes of any such exercise, the determination
of the Exercise Price shall be
appropriately adjusted to apply to such
Alternate Consideration based on the amount
of Alternate Consideration issuable
in respect of one share of Common
Stock in such Fundamental Transaction,
and the Company shall apportion the
Exercise Price among the Alternate Consideration
in a reasonable manner
reflecting the relative value
of any different components of the Alternate
Consideration. If holders of Common
Stock are given any choice as
to the securities, cash or
property to be received in a

    	 

    	 

    

Fundamental
Transaction, then the Holder shall be
given the same choice as to the Alternate
Consideration it receives upon
any exercise of this Warrant
following such Fundamental Transaction.
To the extent necessary
to effectuate the foregoing provisions,
any successor to the Company
or surviving entity in such
Fundamental Transaction shall
issue to the Holder a new
warrant consistent with  the foregoing
provisions and evidencing the
Holder’s right to
exercise such warrant into Alternate
Consideration.

 

4. NON-CIRCUMVENTION. The Company
covenants and agrees that the
Company will not, by amendment
of its articles of incorporation,
bylaws or through any reorganization,
transfer of assets, consolidation, merger,
scheme of arrangement, dissolution,
issue or sale of securities,
or any other voluntary action,
avoid or seek to avoid the observance
or performance of any of the terms
of this Warrant, and
will at all times in good faith
carry out all the provisions of
this Warrant and take all action
as may be required to protect
the rights of the Holder. Without
limiting the generality of the foregoing,
the Company (i) shall
not increase the par value
of any shares of Common Stock
receivable upon the
exercise of this Warrant
above the Exercise Price then
in effect, (ii) shall
take all such actions as
may be necessary or appropriate
in order that the Company
may validly and legally issue fully paid and non-
assessable shares of
Common Stock upon the exercise
of this Warrant, and
(iii) shall, so long as
this Warrant is outstanding,
have authorized and reserved,
free from preemptive
rights, a sufficient number
of shares of Common Stock to
provide for the exercise of the
rights represented by this Warrant
(without regard to any
limitations on exercise).

 

5. WARRANT HOLDER NOT
DEEMED A SHAREHOLDER. Except
as otherwise specifically provided herein,
this Warrant, in and
of itself, shall not entitle the
Holder to any voting
rights or other rights as a
shareholder of the Company. In addition,
nothing contained in this Warrant
shall be construed as imposing
any liabilities on the Holder to
purchase any securities (upon exercise
of this Warrant or otherwise)
or as a shareholder of the Company,
whether such liabilities are
asserted by the Company
or by creditors of the Company.

 

6.
REISSUANCE OF WARRANTS.

 

(a)               
Lost, Stolen or Mutilated Warrant.
If this Warrant is lost, stolen,
mutilated or destroyed,
the Company will, on such
terms as to indemnity or otherwise
as it may reasonably impose
(which shall, in the case of
a mutilated Warrant,
include the surrender thereof), issue a
new Warrant of like denomination
and tenor as this Warrant
so lost, stolen,
mutilated or destroyed.

 

(b)              
Issuance of New Warrants.
Whenever the Company is required
to issue a new Warrant
pursuant to the terms of this
Warrant, such new Warrant shall
be of like tenor with this
Warrant, and shall have
an issuance date, as indicated on
the face of such new Warrant which
is the same as the
Issuance Date.

 

7.
TRANSFER.

 

(a)               
Notice of Transfer. The
Holder, by acceptance hereof, agrees to
give written notice
to the Company before transferring this
Warrant or transferring any
Warrant Shares of such
Holder’s intention to do
so, describing briefly the manner
of any proposed transfer. Promptly upon
receiving such written notice,
the Company shall present
copies thereof to the Company’s
counsel. If

    	 

    	 

    

 

the proposed
transfer may be effected
without registration or qualification
(under any federal or state
securities laws), the Company,
as promptly as practicable, shall
notify the Holder thereof,
whereupon the Holder shall
be entitled to transfer this Warrant
or to dispose of Warrant Shares received
upon the previous exercise
of this Warrant, all in accordance
with the terms of the notice delivered
by the Holder to the Company; provided,
however, that an appropriate legend
may be endorsed on this Warrant or the
certificates for such Warrant
Shares respecting restrictions upon transfer
thereof necessary or advisable
in the opinion of counsel and satisfactory
to the Company to prevent further
transfers which would be in violation
of Section 5 of the Securities
Act of 1933 and applicable state securities laws;
and provided further that
the prospective transferee or purchaser
shall execute an Assignment
of Warrant in substantially
the form attached hereto as
Exhibit B and such other
documents and make such
representations, warranties, and agreements
as may be required solely
to comply with the exemptions
relied upon by the Company for
the transfer or disposition of
the Warrant or Warrant Shares.

 

(b)              
If the proposed transfer or disposition
of this Warrant or such Warrant
Shares described
in the written notice
given pursuant to this Section 7 may
not be effected without registration
or qualification of this
Warrant or such Warrant
Shares, the Holder will limit
its activities in respect to
such transfer or disposition as
are permitted by law.

 

8.                 
NOTICES. Whenever notice
is required to be given under
this Warrant, unless otherwise
provided herein, such notice shall
be given in accordance with
the notice provisions contained
in the Note. The Company shall
provide the Holder with prompt written
notice (i) immediately upon
any adjustment
of the Exercise Price, setting forth in
reasonable detail, and certifying, the
calculation of such
adjustment and (ii) at
least 20 days prior to the date
on which the Company
closes its books or takes a
record (A) with respect to any
dividend or distribution upon
the shares of Common Stock, (B) with respect
to any grants, issuances or sales
of any stock or other securities directly or indirectly
convertible into or exercisable or exchangeable for
shares of Common Stock or other
property, pro rata to the
holders of shares of Common Stock
or (C) for determining rights
to vote with respect
to any Fundamental Transaction,
dissolution or liquidation, provided
in each case that such
information shall be made
known to the public prior to
or in conjunction with such notice
being provided to the Holder.

 

9.                 
AMENDMENT AND WAIVER.
The terms of this Warrant may
be amended or waived (either generally
or in a particular instance
and either retroactively or prospectively)
only with the written consent
of the Company and the Holder.

 

10.             
GOVERNING LAW. This Warrant
and all rights, obligations and liabilities
hereunder shall be
governed by, and construed
in accordance with, the internal
laws of the State
of New York, without giving
effect to the conflicts-of-law principles
thereof.

 

11.             
DISPUTE RESOLUTION.
In the case of a dispute as to the determination
of the Exercise Price, the Closing
Sale Price, or the arithmetic calculation
of the Warrant Shares,
the Company or the Holder (as
the case may be) shall submit
the disputed determinations or arithmetic
calculations via facsimile
(a) within two business days
after receipt of the applicable notice
giving rise to such dispute
to the Company or the Holder,
as the case may be, or
(b) if no notice gave rise to
such dispute, at any time
after the Holder learned of
the circumstances giving rise
to such dispute.
If the Holder and the Company
are unable to agree upon such determination
or calculation of
the Exercise Price, Closing Sale Price or
the Warrant Shares within three
business days of such disputed determination
or arithmetic calculation

    	 

    	 

    

 

being submitted
to the Company or the Holder,
as the case may be, then
the Company shall, within two
business days thereafter submit
via facsimile (x) the disputed
determination of the Exercise Price
or Closing Sale Price
to an independent, reputable investment
bank selected by the Company
and approved by the Holder
or (y) the disputed
arithmetic calculation of
the Warrant Shares to the Company’s
independent, outside accountant.
The Company shall
cause at its expense the investment
bank or the accountant,
as the case may be, to perform the
determinations or calculations and notify
the Company and the Holder
of the results no later than ten business
days from the time
it receives the disputed
determinations or calculations. Such investment
bank’s or accountant’s determination
or calculation, as the case may
be, shall be binding upon all parties
absent manifest error.

 

12.             
ACCEPTANCE. Receipt of this Warrant by the
Holder shall constitute acceptance
of and agreement to all of the
terms and conditions contained herein.

 

13.             
CERTAIN DEFINITIONS.
For purposes of this Warrant, the following
terms shall have
the following meanings:

 

(a)               
“Bloomberg” means Bloomberg
Financial Markets.

 

(b)              
“Closing Sale Price”
means, for any security as of any date,
(i) the last closing trade price
for such security on the Principal
Market, as reported by Bloomberg, or,
if the Principal Market begins
to operate on an extended hours basis and does
not designate the closing
trade price, then the last trade
price of such security prior to 4:00
p.m., New York time, as reported by
Bloomberg, or

(ii)  
if the foregoing does not
apply, the last trade price of such security
in the over-the-counter
market for such security
as reported by Bloomberg, or (iii)
if no last trade price is reported for
such security by Bloomberg, the
average of the bid and ask prices
of any market
makers for such security as reported
by the OTC Markets.
If the Closing Sale Price cannot
be calculated for a security on a particular
date on any of the foregoing bases,
the Closing Sale Price of
such security on such date shall be the fair market
value as mutually determined by
the Company and the Holder. All such determinations
to be appropriately adjusted for
any stock dividend, stock split, stock
combination or other similar transaction
during the applicable calculation
period.

 

(c)               
“Common Stock” means
(i) the Company’s common stock,
par value $0.01 per share, and (ii)
any share capital into which such
common stock shall have been changed
or any share capital resulting
from a reclassification of
such common stock.

 

(d)              
“Common Stock Equivalents”
means any securities
of the Company that would
entitle the holder thereof
to acquire at any time
Common Stock, including without
limitation any
debt, preferred stock, rights,
options, warrants or other instrument
that is at any time convertible
into or exercisable or exchangeable
for, or otherwise entitles the holder
thereof to receive, Common Stock.

 

(e)               
“Exempt Issuance” means
the issuance of (i) shares of
Common Stock or options
to employees, officers, directors
or unaffiliated consultants
of the Company pursuant to any
stock or option plan
duly adopted by a majority
of the non-employee members of
the Board of Directors of the Company
or a majority of the members
of a committee of non-employee directors
established for such purpose, (ii) any
securities upon the exercise
or conversion of any securities
issued pursuant to the Securities
Purchase Agreement or agreements
in substantially similar form
pursuant to which Notes and

    	 

    	 

    

Warrants
were or are sold, (iii) any Common
Stock upon the exercise or conversion
of securities that are issued and outstanding
as of the date of
the Securities Purchase Agreement,
(iv) securities issued pursuant to
or in connection with acquisitions
or strategic transactions approved
by a majority of the disinterested
directors of the Company, (v)
shares of Common Stock issued
or issuable in connection
with regularly scheduled
dividend payments on the Company’s
Series A Preferred Stock, and
(vi) shares of
Common Stock issued pursuant to any
loan or leasing arrangement, real property
leasing arrangement, or debt financing
from a bank approved
by the Board of Directors of the Company.

 

(f) “Principal Market” means
the primary national securities exchange
on which the Common Stock is then
traded.

 

(g)
“SEC” means
the U.S. Securities and Exchange Commission.

 

(h) “Trading Day”
means (i) any day on which the Common
Stock is listed or quoted
and traded on its Principal
Market, (ii) if the Common
Stock is not then listed or
quoted and traded on any national
securities exchange, then a day on which
trading occurs on any over-the-counter
markets, or (iii)
if trading does not occur on the
over-the-counter markets, any business
day.

 

(i) “Weighted Average
Price” means, for any security
as of any date, (i) the dollar-
volume weighted-average price
for such security on the Principal
Market during the period beginning
at 9:30 a.m., New York City time,
and ending at 4:00 p.m., New York
City time, as reported by Bloomberg
or (ii) if the foregoing does
not apply, the dollar-volume weighted-average
price of such security in the
over-the-counter market
for such security during the period
beginning at 9:30 a.m.,
New York City time, and ending at
4:00 p.m., New York City time,
as reported by Bloomberg, or (iii) if
no dollar-volume weighted-average
price is reported for such security by
Bloomberg for such hours, the average
of the highest
closing bid price and the lowest
closing ask price of any of the market
makers for such security
as reported in OTC
Markets. If the Weighted Average
Price cannot be calculated for such security on
such date on any of
the foregoing bases, the Weighted
Average Price of such security on such
date shall be the fair
market value as
mutually determined by the Company
and the Holder. If the Company
and the Holder are unable to
agree upon the fair market value
of such security, then such dispute shall
be resolved pursuant to Section
12 with the term “Weighted Average
Price” being substituted for the
term “Exercise Price.”
All such determinations shall
be appropriately adjusted for
any share dividend, share split or
other similar transaction
during such period.

 

 

 

* * * * * * *

    	 

    	 

    

 

IN
WITNESS WHEREOF, the
Company has caused
this Warrant to
Purchase Common Stock
to be duly executed as
of the date indicated 
above.

 

 

CREATIVE
REALITIES, INC.

 

/s/ John Walpuck

John Walpuck

Chief Financial Officer

 

    	 

    	 

    

EXHIBIT
A

 

FORM OF EXERCISE
NOTICE

 

(To be executed
by the registered holder to exercise
this Warrant to Purchase
Common Stock)

 

 

THE
UNDERSIGNED holder
hereby exercises
the right to
purchaseof the
shares of Common Stock (“Warrant
Shares”) of Creative Realities, Inc.,
a Minnesota corporation
(the “Company”), evidenced
by the attached copy of the Warrant
to Purchase Common Stock

(the “Warrant”).
Capitalized terms used herein and
not otherwise defined shall have the
respective meanings
set forth in the Warrant.

 

	1.		Form of Exercise Price.
The Holder intends that payment
of the Exercise Price shall be
made as (check one):

 

□
a cash exercise with respect to
Warrant Shares; and/or

 

□
a “Cashless Exercise” with respect to Warrant
Shares.

 

	2.		Payment of Exercise
Price. In the event that the holder has elected
to exercise some or all of the
Warrant Shares to be issued pursuant
hereto, the holder shall pay
the Aggregate Exercise
Price in the sum
of $ to the Company in accordance
with the terms of the Warrant.

 

	3.		Delivery  of 
Warrant  Shares. 
The  Company 
shall  deliver  to 
the  holder Warrant
Shares in accordance with the
terms of the Warrant.

 

 

Date:  
___________________________

 

 

 

 

___________________________________

 

 

(Print Name of Registered Holder)

 

By: 

Name:

Title:

 

    	 

    	 

    

EXHIBIT
B

 

FORM OF ASSIGNMENT
OF WARRANT

 

(To be signed only upon authorized
transfer of the Warrant)

 

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
___________________ the right to purchase ___________ shares of common
stock of Creative Realities, Inc.,
to which the within Warrant to Purchase
Common Stock relates and appoints
________________, as attorney-in-fact, to transfer said right
on the books of Creative Realities, Inc.
with full power of substitution and re-substitution
in the premises. By accepting such transfer, the transferee has
agreed to be bound in all respects by
the terms and conditions of
the within Warrant.

 

 

Dated:  ____________________

 

 

 

 

(Signature)
*

 

 

 

(Name)

 

 

 

(Address)

 

 

 

(Social
Security or Tax Ident. No.)

 

 

 

* The signature on this
Assignment of Warrant
must correspond to the name as written
upon the face of the Warrant
to Purchase Common Stock in every
particular without alteration or enlargement
or any change whatsoever. When
signing on behalf of a corporation,
partnership, trust or other entity,
please indicate your
position(s) and title(s) with such entity.ex10_24.htm

Exhibit 10.24

 

 

 

 

 

 

MASTER CREDIT FACILITY

 

 

by and among

 

 

PROFESSIONAL DIVERSITY NETWORK, INC.,

 

NAPW, INC.,

 

NOBLE VOICE LLC

 

COMPLIANT LEAD LLC

 

and

 

WHITE WINSTON SELECT ASSET FUNDS, LLC,

 

 

March  30, 2016

 

 

 

 

 

 

  

  

  

 

TABLE OF CONTENTS

 

	
Article 1  Terms of Loan

	
1

	 	 
	
Section 1.1  Loan Amount

	
1

	
Section 1.2  Promissory Note; Discount to Face Value

	
1

	
Section 1.3  Base Interest; Default Interest

	
1

	
Section 1.4  Non-Utilization Fee

	
2

	
Section 1.5  Yield Maintenance Payment

	
2

	
Section 1.6  Term

	2
	
Section 1.7  Advances and Repayments

	
3

	
Section 1.8  Disbursements of Loan Proceeds

	
4

	
Section 1.9  Use of Proceeds

	
4

	
Section 1.10  Repayment in the Ordinary Course

	
4

	
Section 1.11  Late Fees

	
4

	
Section 1.12  Collateral for Loan

	
4

	
Section 1.13  Additional Consideration

	
4

	 	 
	
Article 2  Closing; Conditions to Closing

	
4

	 	 
	
Section 2.1  Closing Mechanics

	
4

	
Section 2.2  Lender’s Conditions to Closing

	
5

	 	 
	
Article 3  Representations and Warranties

	
7

	 	 
	
Section 3.1  Existence and Authority of the Borrower

	
7

	
Section 3.2  Capitalization; Issuance

	
8

	
Section 3.3  Financial Condition

	
8

	
Section 3.4  No Breach or Violation

	
8

	
Section 3.5  Taxes; Reserves

	
8

	
Section 3.6  Absence of Actions

	
9

	
Section 3.7  Environmental Compliance

	
9

	
Section 3.8  Operation of Business

	
9

	
Section 3.9  Ownership

	
9

	
Section 3.10  Relations with Third Parties

	
9

	
Section 3.11  Interests in Personal Property

	
9

	
Section 3.12  Contracts

	
10

	
Section 3.13  Accounts Receivable

	
10

	
Section 3.14  Status of Obligations

	
10

	
Section 3.15  Truth and Completeness of Statements

	
10

	
Section 3.16  No Notice of Violations

	
10

	 	 
	
Article 4  Affirmative Covenants

	
10

	 	 
	
Section 4.1  Board Meetings

	
10

	
Section 4.2  Audit Right

	
11

	
Section 4.3  Financial Statements and Reports

	
11

	
Section 4.4  Other Information

	
12

 

  

i

  

 

	
Section 4.5  Maintenance of Insurance

	
12

	
Section 4.6  Maintenance of Existence

	
12

	
Section 4.7  Maintenance of Records

	
12

	
Section 4.8  Maintenance of Property and Collateral

	
12

	
Section 4.9  Notice of Litigation

	
12

	
Section 4.10  Compliance with Laws

	
12

	 	 
	
Article 5  Negative Covenants

	
12

	 	 
	
Section 5.1  Certain Limitations

	
12

	
Section 5.2  Limitation on Transactions with Affiliates

	
13

	
Section 5.3  Limitation on Purchases and Acquisitions

	
13

	
Section 5.4  Limitation on Merger or Consolidation

	
13

	
Section 5.5  Liens on Collateral

	
13

	
Section 5.6  No Additional Debt

	
13

	
Section 5.7  Sale of Property or Collateral

	
14

	
Section 5.8  Contingent Liabilities

	
14

	
Section 5.9  No Distributions or Repurchases

	
14

	
Section 5.10  Minimum Current Ratio

	
14

	 	 
	
Article 6  Events of Default and Remedies

	
14

	 	 
	
Section 6.1  Events of Default

	
14

	
Section 6.2  Remedies Upon Default

	
15

	
Section 6.3  Cooperation of the Borrower

	
16

	 	 
	
Article 7  Miscellaneous

	
16

	 	 
	
Section 7.1  Termination

	
16

	
Section 7.2  Amendments; Waivers

	
16

	
Section 7.3  Assignment of Agreement by the Borrower

	
16

	
Section 7.4  Assignment of Agreement by the Lender

	
16

	
Section 7.5  Notices

	
16

	
Section 7.6  Agreement Not Intended as Partnership or Agency

	
17

	
Section 7.7  Agreement to Govern

	
17

	
Section 7.8  Costs, Expenses, and Taxes

	
17

	
Section 7.9  Severability of Terms

	
18

	
Section 7.10  Headings

	
18

	
Section 7.11  Survival

	
18

	
Section 7.12  Governing Law

	
18

	
Section 7.13  Captions; Headings

	
18

	
Section 7.14  Counterparts; Execution

	
18

	
Section 7.15  Entire Agreement

	
18

	
Section 7.16  Neutral Construction; No Coercion or Duress

	
19

	  	  
	
Exhibits

	  
	  	  
	
Exhibit A – Form of Secured Promissory Note

	  

 

  

ii

  

 

	
Exhibit B – Form of Drawdown Affidavit

	  
	
Exhibit C – Form of Fixed $0.25 Warrant

	  
	
Exhibit D – Form of Pro Rata Warrant

	  
	
Exhibit E – Form of Fixed $2.50 Warrant

	  
	
Exhibit F – Form of Consulting and Monitoring Agreement

	  
	
Exhibit G – Form of Security Agreement

	  
	
Exhibit H – Form of Board Representation Agreement

	  
	  	  
	
Schedules

	  
	  	  
	
Schedule 2.2(b) – Delinquency

	  
	
Schedule I – Disclosure Schedule

	  

  

iii

  

MASTER CREDIT FACILITY

 

This Master Credit Facility (this “Agreement”), dated as of March 30, 2016, is made by and among Professional Diversity Network, Inc., a Delaware corporation (“PDN”), NAPW, Inc., a Delaware corporation and wholly-owned subsidiary of PDN (“NAPW”), Noble Voice LLC, a Delaware limited liability company and a wholly-owned subsidiary of PDN (“Noble”), Compliant Lead LLC, a Delaware limited liability company and a wholly-owned subsidiary of PDN (“Compliant”), and White Winston Select Asset Funds, LLC, a Delaware limited liability company (“WWSAF” or the “Lender”).

 

PDN, NAPW, Noble and Compliant are collectively referred to herein as the “Borrower,” and PDN, NAPW, Noble and Compliant shall be jointly and severally liable for all obligations of the Borrower set forth herein.  All references herein to the Borrower refer to PDN, NAPW, Noble and Compliant, unless otherwise explicitly provided or required by the context.

 

Background

 

	 	
A 

	
The Borrower desires a mechanism for access to capital it may need to help finance its operations and/or expansion, and WWSAF is willing to provide such capital to the Borrower in the form of a credit facility on the terms set forth herein (the “Loan”).

 

	 	
B 

	
To secure the Borrower’s various obligations in connection with this Agreement, the Borrower has also agreed to execute and deliver various additional agreements and instruments of collateral, as described herein (collectively, the “Loan Documents”).

 

In consideration of the premises and the mutual covenants and agreements herein set forth, and in reliance on the representations and warranties contained herein, the parties hereby agree as follows:

 

Article 1

 

Terms of Loan

 

Section 1.1   Loan Amount.  Upon the terms and subject to the conditions of this Agreement, the Lender agrees to extend financing to the Borrower in the original principal amount of up to Five Million Dollars ($5,000,000) (the “Loan Amount”).

 

Section 1.2   Promissory Note; Discount to Face Value.  The Loan shall be evidenced by a Secured Promissory Note, substantially in the form attached to this Agreement as Exhibit A (the “Note”), with an initial face value equal to the Loan Amount. The Note shall be issued at a five percent (5%) discount to the Loan Amount (the “Closing Fee”), which discount shall be disbursed to WWSAF from the proceeds of the Note at Closing (defined below).

 

Section 1.3   Base Interest; Default Interest.

 

(a)         Base Interest:  Subject to the terms of this Agreement which provide for a higher interest rate upon the occurrence of certain events and acceleration on the principal amount due, including upon default under the terms hereof, interest shall accrue on all amounts advanced under the Note during the period following the date of this Agreement at an annual rate of eight percent (8.00%) (the “Base Rate”).  Interest on the average daily balance due under the Loan during the prior month shall be due and payable in advance on the fifth (5th) day of each calendar month. Interest for the period from the Closing to the end of the first calendar month during the term shall be due at the Closing.

 

  

  

  

 

(b)         During all periods of time in which an Event of Default (as defined in Article 6) is ongoing, the interest rate of the Note shall be increased by seven hundred (700) basis points, which increase shall take effect upon the occurrence of the event of default and without the need for WWSAF to notify the Borrower.  The Borrower shall be responsible for curing such default(s) before all respective grace periods expire and for providing unambiguous written proof to WWSAF that such default(s) is cured, or such default(s) shall conclusively be deemed not cured.

 

(c)         Unpaid interest, if any, shall be added to the principal outstanding on the Note at the end of each monthly payment period.

 

Section 1.4          Non-Utilization Fee.  Commencing on the first anniversary of the date of the Note, the Borrower shall pay to the Lender from and after the date hereof a non-utilization fee accruing at the rate of three percent (3.0%) per annum on the average daily unborrowed portion of the Note.  All non-utilization fees shall be payable quarterly in arrears on the last day of March, June, September and December (with the first such payment being calculated for the period from the first anniversary of the date of the Note and ending on March 31, 2017), and, in addition, on the date on which Lender’s commitment under the Note is terminated in whole.  Such non-utilization fee shall be calculated on the basis of the actual number of days elapsed and a three hundred sixty (360) day year.

 

Section 1.5           Yield Maintenance Payment.  If during the Term  PDN shall issue or sell, or is, in accordance with this Section 1.5, deemed to have issued or sold, in excess of 1,500,000 shares (the “Adjustment Threshold”) of its capital stock for a consideration per share less than $0.25, as adjusted from time to time and in effect immediately prior to such issuance or sale (or deemed issuance or sale), then on the Maturity Date the Borrower shall pay to the Lender, in addition to all other amounts then due and payable, such amount as is necessary to make the Lender’s internal rate of return (“IRR”) under the Note (as calculated below) equal to twenty percent (20%) based on the advances and repayments made during the term of the Note.  The IRR shall be calculated as follows:

 

Where:

di = the ith, or last, payment date.

d1 = the 0th payment date.

Pi = the ith, or last, payment

The IRR shall be inclusive of the Closing Fee and all interest paid at the Base Rate, but exclusive off all other fees and other consideration payable pursuant to the Loan Documents including, without limitation, any default interest and late fees. The Company shall be deemed to have issued or sold capital stock subject to the adjustment provisions of this Section 1.5 upon the issuance or sale of any options, warrant, securities, convertible securities or other rights to subscribe for, purchase, exchange for or convert into capital stock; provided however that the IRR shall not be payable unless and until the company has issued or sold shares of capital stock in excess of the Adjustment Threshold.

 

Section 1.6          Term.  The term of the Term Loan shall commence on the date of this Agreement and continue until the second anniversary of the Closing Date (as adjusted pursuant hereto, the “Maturity Date”), unless the period is extended or terminated sooner as provided herein (the “Term”). 

 

  

2

  

 

Section 1.7          Advances and Repayments.

 

(a)          Drawdown Requests.

 

(i) During the Term, the Borrower may request an advance under the Loan (a “Drawdown”) by delivering to the Lender a signed affidavit, dated as of the date of such request, substantially in the form attached to this Agreement as Exhibit B (the “Drawdown Affidavit”).  The Lender may rely on information on or delivered with the Drawdown Affidavit.  Requests for advances shall be made not more than once per calendar month, and shall be in amounts no less than One Hundred Thousand Dollars ($100,000). The Lender will use commercially reasonable efforts to approve (and fund) or deny the request for an advance within twenty (20) days of receipt.  It shall be a condition to each advance that no Event of Default exists on the date of the advance and that the advance will not trigger any Event of Default.  The  principal amount outstanding under the Note at any time shall not exceed the Loan Amount.

 

(ii) Subject to satisfaction of the conditions set forth herein and in the Note, the Lender shall approve any Drawdown requested by the Borrower so long as the aggregate principal amount outstanding under the Note immediately following such Drawdown would not exceed seventy-five percent (75%) of the outstanding balance of the Borrower’s eligible customer receivables on the date of such Drawdown (the “Compulsory Advance Threshold”). The Borrower’s customer receivables shall be considered “eligible customer receivables” for purposes of determining the Compulsory Advance Threshold if such receivables are not more than sixty (60) days past due and such customer is not otherwise indebted to the Borrower. If the principal amount outstanding under the Note exceeds the Compulsory Advance Threshold at the end of any calendar month (such excess amount, the “Overdrawn Amount”), the Borrower shall, within forty-five (45) business days, repay at least so much of the balance under the Note as is necessary to reduce the outstanding principal balance below the Compulsory Advance Threshold. The Borrower may request an Exempt Advance (defined below) to cover some or all of the Overdrawn Amount, it being understood that such advance shall be subject to the terms and conditions set forth herein.

 

(iii) At the time of making any request for a Drawdown, the Borrower may also request that such Drawdown not be included in determining if the outstanding principal amount under the Note exceeds the Compulsory Advance Threshold (such advance, an “Exempt Advance”). Each Exempt Advance shall be subject to (A) the use of the proceeds of such Exempt Advance being acceptable to the Lender, in its reasonable discretion and (B) the Borrower’s business and financial condition being acceptable to the Lender, in its reasonable good-faith judgment.

 

(b)   Collection and Application of Receivables.  Until such time as all of the Borrower’s obligations under the Loan Documents have been satisfied in full, all revenues and payments due to the Borrower from the operation of its business shall be paid to a deposit account (the “Collateral Account”) at a bank acceptable to the Lender, in its reasonable discretion, and subject to the terms of a commercially reasonable deposit account control agreement in form and substance acceptable to the Lender, in its commercially reasonable discretion (the “Account Control Agreement”). All receivables and collections are Collateral and, if an Event of Default occurs, the Lender may apply them to the obligations of the Borrower under the Loan Documents.  The Borrower shall be solely responsible for paying the actual third-party costs for administration of the Collateral Account.

 

  

3

  

 

Section 1.8   Disbursements of Loan Proceeds. At the Closing (as defined herein), an advance under the Loan in the aggregate amount of Two Million Dollars ($2,000,000)) shall be made immediately (A) to pay, or to reimburse WWSAF for the payment of all fees, costs and expenses incurred by WWSAF in conjunction with the transactions contemplated hereby in accordance with Section 7.8, (B) to pay all fees, costs and expenses of the Borrower’s legal, tax and accounting advisors incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation, the fees of Greenberg Traurig, LLP, legal counsel to PDN, and (C) for such other purposes as the Lender may agree. Subject to the terms and conditions herein, some or all of the proceeds advanced at the Closing may be an Exempt Advance.

 

Section 1.9   Use of Proceeds.  The proceeds of the Loan shall be exclusively for working capital of the Borrower and to pay the costs, fees and expenses incurred in connection with this financing.  The Borrower covenants and agrees that no proceeds from the Loan shall be paid or distributed to any member, manager, officer, director or employee of the Borrower (other than with respect to salaries and/or authorized expense reimbursements paid to employees in the ordinary course of business or pursuant to employment agreements disclosed to and approved by WWSAF)..

 

Section 1.10         Repayment in the Ordinary Course.  Subject to acceleration upon occurrence of an Event of Default (as defined in Article 6, below), the entire outstanding balance of the Loan is due and payable on the Maturity Date.

 

Section 1.11         Late Fees.  In addition to, and not in limitation of, the foregoing provisions, if any payment owed under the Note, this Agreement or any of the other Loan Documents, agreements, certificates, documents or instruments required to be executed and delivered by the Borrower in connection with this Agreement shall not have been paid within five (5) days of the due date thereof, the Borrower agrees to pay to WWSAF a late charge of six percent (6%) of such payment, including any payments due at maturity or the date of acceleration due to an Event of Default.

 

Section 1.12        Collateral for Loan.  The Borrower’s obligations under the Loan following the Closing shall be secured by a first priority lien (senior to all other creditors of the Borrower) in all tangible and intangible property of the Borrower including, without limitation, inventory, machinery and equipment, goods, merchandise, and other property (collectively, the “Collateral”). The Borrower shall be solely responsible for paying the actual third-party fees and costs for securing the Collateral.

 

Section 1.13        Additional Consideration.  In partial consideration for WWSAF’s agreement to extend the Loan to the Borrower, at the Closing the Borrower shall issue to WWSAF (a) a warrant, in substantially the form attached to this Agreement as Exhibit C (the “Fixed $0.25 Warrant”), to purchase up to 1,000,000 shares of the PDN’s common stock with an exercise price of $0.25 per share, (b) a warrant, in substantially the form attached to this Agreement as Exhibit D (the “Pro Rata Warrant”), to purchase up to 1,750,000 shares of PDN’s common stock with an exercise price of $0.25 per share and (c) a warrant, in substantially the form attached to this Agreement as Exhibit E (the “Fixed $2.50 Warrant” and together with the Fixed $0.25 Warrant and the Pro Rata Warrant, the “Warrants”), to purchase up to 1,000,000 shares of the PDN’s common stock with an exercise price of $2.50 per share.  Each Warrant shall be exercisable for five (5) years from the date it is issued.

 

Article 2

 

Closing; Conditions to Closing

 

Section 2.1   Closing Mechanics.

 

(a) The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place by electronic transmission of documents and deliverables at 10 a.m. ET on the first business day following the date on which all conditions precedent to the Closing have been satisfied or waived, or such later time and date as WWSAF may elect (such date, the “Closing Date”).

 

  

4

  

 

(b)   At the Closing,

 

(i)   the Borrower shall provide WWSAF with a Drawdown Affidavit with respect to the funds to be drawn at Closing,.

 

(ii)      the Borrower and WWSAF will enter into a Consulting and Monitoring Agreement, substantially in the form attached to this Agreement as Exhibit F, pursuant to which the Borrower shall pay to WWSAF a monthly monitoring fee and shall reimburse WWSAF for all reasonable and necessary out of pocket fees and expenses incurred in monitoring the Borrower;

 

(iii)         the Borrower shall deliver the Warrants to WWSAF;

 

(iv)        the Borrower and the Lender shall execute and deliver all other documents, agreements, instruments and certificates as reasonably may be necessary to consummate the transaction as described herein; and

 

(v)     subject to fulfillment by the Borrower of its obligations hereunder, and at Borrower’s sole discretion, WWSAF shall make a disbursement of the proceeds from the LOC Loan in accordance with this Agreement, if Borrower so requests.

 

Section 2.2   Lender’s Conditions to Closing.  The obligations of WWSAF hereunder are subject to the satisfaction of each of the follow­ing conditions precedent.

 

(a)   Subordination of Related-Party Indebtedness.  All loans, payments, and notes due to officers, directors and other affiliates of the Borrower, if any, shall be subordinated to the Borrower’s obligations to WWSAF hereunder and in the Loan Documents, on terms and conditions satisfactory to WWSAF, in its commercially reasonable discretion.

 

(b)          Delinquency.  The Borrower shall be current with respect to all of its obligations, including trade obligations, and any other payments relating to any and all taxes and other fees and assessments due and/or payable, except for those obligations set forth on Schedule 2.2(b).

 

(c)   Opinion of U.S. Counsel.  WWSAF shall have received an opinion from legal counsel to the Borrower, in form and substance satisfactory to WWSAF and its counsel, with regards to the authority of the Borrower to enter into this Agreement and the transactions contemplated hereby, the validity and enforceability of the obligations of the Borrower under this Agreement and the other Loan Documents, the perfection of WWSAF’s security interest in the Collateral, the organization, existence and good standing of the Borrower, and such other matters as WWSAF may reasonably request, all in a form appropriate and acceptable to WWSAF and its counsel.

 

(d)   Security Agreements.  To secure the rights of WWSAF in the Collateral, the Borrower shall have:

 

(i)       executed and delivered to WWSAF a security agreement, substantially in the form attached to this Agreement as Exhibit G (the “Security Agreement”);

 

  

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(ii)         delivered to WWSAF acknowledgment copies of proper Financing Statements (Form UCC-1), or such other evidence of filing as may be acceptable to WWSAF, naming the Borrower as the debtor and WWSAF as the secured parties, and other similar instruments or documents, filed under the Uniform Commercial Code (or equivalent) in all jurisdictions as may be necessary or desirable to perfect the liens of WWSAF created by the Security Agreement;

 

(iii)        delivered to WWSAF copies of Requests for Information (Form UCC-11) (or similar search report certified by a party acceptable to WWSAF), dated as of a date reasonably proximate to the Closing Date, listing all effective financing statements that name the Borrower as debtor, and that are filed in the jurisdictions in which filings were made pursuant to Section 2.2(d)(i), together with copies of such financing statements, none of which shall cover any collateral described in the Security Agreement unless either WWSAF shall consent thereto in writing or Borrower procures releases thereof, before or concurrent with the Closing, in form and substance acceptable to the Lender, in its reasonable discretion;

 

(iv)        established the Collateral Account and executed and delivered the Account Control Agreement;

 

(v)         delivered to WWSAF a collateral assignment of any key contracts and supply agreements related to the purchase and sale of products used in the Borrower’s operations in form and substance acceptable to WWSAF, in its sole discretion;

 

(vi)        delivered to WWSAF a collateral assignment of any key contracts and supply agreements related to the purchase and sale of Borrower’s products by third-party customers in form and substance acceptable to WWSAF, in its sole discretion;

 

(vii)       executed and delivered a pledge and assignment agreement (the “Pledge Agreement”) granting WWSAF a security interest in all of the ownership interest of each direct and indirect subsidiary of PDN; delivered to counsel for WWSAF certificates representing such ownership interests, along with stock powers executed in blank; and, to the extent necessary to permit the grant of a security interest to WWSAF, as provided herein, amended or caused to be amended the governing documents of each such subsidiary; and

 

(viii)      delivered to WWSAF such other documentation as WWSAF may deem necessary or appropriate, in its commercially reasonable discretion, to secure the rights of WWSAF in the Collateral, as set forth herein.

 

(e)   Brand Strategy.  PDN shall have contracted with a brand-marketing and public relations firm with respect to a comprehensive brand-strategy and roll-out plan.

 

(f)   Board Representation.  PDN shall have entered into a Board Representation Agreement, in substantially the form attached to this Agreement as Exhibit H.

 

(g)      Lender’s Due Diligence. WWSAF shall have completed its review and due diligence examination of the Borrower’s books and records, its accounting practices and procedures, employing such review, audit and testing procedures as WWSAF deems appropriate.  The results of such examination shall be satisfactory to WWSAF in its sole discretion.

 

(h)          Interim Financials.  The Borrower shall have delivered to WWSAF interim financial statements – which shall include an income statement, balance sheet and statement of cash flow, all prepared in accordance with generally accepted accounting principles, consistently applied – dated not earlier than forty-five (45) days prior to the Closing, certified as true and accurate by the Borrower’s chief financial officer.

 

  

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(i)   Organizational Documents/Resolutions, etc.  WWSAF shall have received:

 

(i)           From the Borrower, a borrowing resolution in form and substance acceptable to WWSAF, dated as of the Closing Date, certified by an authorized officer of the Borrower;

 

(ii)          From the Borrower, a certificate from an appropriate officer, in form and substance acceptable to WWSAF, as to the incumbency of directors of the Borrower and of the officers of the Borrower authorized to act with respect to this Agreement and the other Loan Documents (upon which certificate WWSAF may conclusively rely);

 

(iii)         A true and correct copy of the Borrower’s organization documents, certified by an officer of the jurisdiction where the Borrower is organized (with respect to all organization documents required to be filed in such jurisdiction) or by an appropriate officer of the Borrower, and each in form and substance acceptable to WWSAF;

 

(iv)        A certificate confirming the qualification to do business and good standing of the Borrower from each jurisdiction in which the Borrower is qualified to do business;

 

(v)         A copy of the consent of any third parties that may be required in connection with the Loan and the transactions contemplated by this Agreement;

 

(vi)        Such other documents (certified if requested) as WWSAF may reasonably request.

 

(j)   Satisfactory Legal Form.  All documents executed or submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory in form and substance to WWSAF; WWSAF and its counsel shall have received all information and documents as WWSAF or its counsel shall reasonably request; and all legal matters incident to the transactions contemplated by this Agreement and the other Loan Documents shall be satisfactory to WWSAF and their counsel.

 

Article 3

 

Representations and Warranties

 

To induce WWSAF to enter into this Agreement, the Borrower represents and warrants to WWSAF that the following statements are true and correct, except to the extent specifically disclosed in the Disclosure attached as Schedule I to this Agreement, which makes specific reference to each representation or warranty to which the disclosures on such Schedule refer.

 

Section 3.1 Existence and Authority of the Borrower.  Each of PDN, NAPW, Noble and Compliant was duly organized and is validly existing under the laws of the jurisdictions in which it was formed.  Each of PDN, NAPW, Noble and Compliant is qualified to do business and is in good standing in the jurisdiction of its formation, has full power and authority to consummate the transactions contemplated hereby, and has filed all documents and registrations, including tradename registrations, required by law for it to conduct its business.  Each of PDN, NAPW, Noble and Compliant is duly qualified to do business and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the Borrower.  The execution and delivery of this Agreement and the other Loan Documents by PDN, NAPW, Noble and Compliant, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary action of PDN, NAPW, Noble and Compliant, and each of their respective officers, directors, managers, shareholders, members or partners, as applicable.  Each of the agreements, certificates, documents and instruments delivered to WWSAF pursuant to this Agreement or in connection with WWSAF’s due diligence is true, correct and complete in all material respects.

 

  

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Section 3.2   Capitalization; Issuance.  NAPW, Noble and Compliant are each wholly-owned subsidiaries of PDN.  All of the outstanding ownership interest of PDN, NAPW, Noble and Compliant have been validly issued, and were not issued in violation of any rights of any other person.  No option, warrant, call, conversion right or commitment of any kind exists which obligates any of PDN, NAPW, Noble and Compliant to issue any additional ownership interest or other securities convertible into or exchangeable for ownership interest.  Section 3.2 of the Disclosure Schedule sets forth the true and complete capitalization of PDN as of the date of this Agreement, including: (i) issued and outstanding securities issued by PDN; (ii) granted and outstanding options to purchase securities of PDN; (iii) options to purchase securities of PDN that have not yet been granted but are reserved for future grants; and (iv) warrants and other derivative securities, if any, entitling the holder to obtain securities of PDN. There are no shareholder’s agreements, purchaser’s rights agreements, voting trusts of other agreements or understandings to which the Borrower is a party or by which it is bound related to the voting of, or placing any restrictions on, any securities of the Borrower.

 

Section 3.3   Financial Condition.  The balance sheets, state­ments of income and retained earnings, federal tax returns, and other financial statements and financial data of the Borrower furnished to WWSAF and itemized on Section 3.3 of the Disclosure Schedule to induce WWSAF to enter into this Agreement are complete and correct in all material respects and fairly present the financial condition of the Borrower as of the dates thereof and the results of the operations of the Borrower for the periods covered by such statements.  The financial statements for the Borrower have been prepared in accordance with generally accepted accounting principles consistently applied.  Except as set forth in Section 3.3 of the Disclosure Schedule, there has been no material adverse change (financial or otherwise) in the business or operations of the Borrower since the date of such financial statements.  There are no liabilities of the Borrower, fixed or contingent, which are material but are not reflected in the financial statements supplied to WWSAF.  The Borrower has not paid or made any distributions (of cash or property), other than ordinary salary, authorized expense reimbursements, etc. for employee/shareholders made in the ordinary course of business, to the holders of its securities since the date of such financial statements, which distributions are not reflected in the financial statements.

 

Section 3.4   No Breach or Violation.  The consummation of the transactions hereby contemplated, and performance of the Borrower’s obligations under this Agreement and the other Loan Documents will not result in any breach of, or constitute a default under, any mortgage, deed of trust, lease, loan or credit agreement, trust agreement, operating agreement, partnership agreement, settlement agreement, by-laws, articles of incorporation, shareholder agreement or other instrument to which the Borrower is a party or by which the Borrower may be bound or affected.

 

Section 3.5   Taxes; Reserves.  The Borrower has filed or caused to be filed all federal, state, and local tax returns required to be filed by the Borrower and has paid or made arrangement for the payment of all taxes, assessments, and governmental charges and levies thereon, including any interest and penalties, to the extent the same have become due.  The Borrower has set up reserves that are believed by the Borrower to be adequate for the payment of such taxes for the years that have been audited by the respective tax authorities.  Notwithstanding the foregoing, nothing contained in this Section 3.5 shall prevent the Borrower from con­testing in good faith any tax or assessment assessed against the Borrower so long as adequate reserves for payment of the same have been made and verified to WWSAF.

 

  

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Section 3.6   Absence of Actions.  Except as set forth in Section 3.6 of the Disclosure Schedule, there is no pending or threatened action or proceeding against or affecting the Borrower before any court, governmental agency, arbitrator, or otherwise that may, in one case or in the aggregate: materially adversely affect the validity or enforceability of the Loan Documents, the priority of any lien on the Collateral securing the Borrower’s obligations under the Loan Documents, or the financial condition, opera­tions, properties or business of the Borrower; or prevent or impair the Borrower from complying with or performing any of the provisions of this Agreement or the other Loan Documents.  The Borrower is not in default with respect to any judgment, decision, order, writ, injunction, decree, or demand of any court or any governmental authority or under the terms of any contract or agreement to which it is a party or otherwise bound.

 

Section 3.7   Environmental Compliance.  To the best of Borrower’s knowledge, the Borrower is in full compliance with any and all en­vironmental or hazardous waste rules or regulations arising out of any federal, state, or local law.  There has been no use of the properties, and there are no materials present on the properties, that would give rise to liability under any federal, state, or local environmental or hazardous waste law, rule, or regulation.  The Borrower shall indemnify, defend and hold harmless WWSAF from any and all costs, expenses, and liability relating to the Borrower arising out of any environmental or hazardous waste law, rule, or regulation.

 

Section 3.8   Operation of Business.  To the best of Borrower’s knowledge, exercising reasonable diligence and after due inquiry, the Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks and tradenames, or rights thereto, necessary for the business of the Borrower as now conducted and as presently proposed to be conducted, and the Borrower is not in violation of any valid rights of others with respect to any of the foregoing.

 

Section 3.9   Ownership.  Except as set forth in Section 3.9 of the Disclosure Schedule, the Borrower is the owner of all Collateral purported to be owned by it, free from any lien, security interest, encumbrance or other right, title or interest of any other person, firm or corporation, and the Borrower shall defend such Collateral against all claims and demands of all persons at any time claiming the same or any interest therein adverse to WWSAF.

 

Section 3.10     Relations with Third Parties.  Except as set forth in Section 3.10 of the Disclosure Schedule, the Borrower’s relations with its vendors, suppliers and customers are good, and the Borrower has not been made aware of any likely event or circumstances that would adversely affect such relations in any material respect.

 

Section 3.11         Interests in Personal Property.  Section 3.11 of the Disclosure Schedule contains a true and complete list and brief description of all furniture, fixtures, and equipment, and other personal property of the Borrower, which comprises in all material respects all personal property presently used by the Borrower in the ordinary course of its business.  Except as set forth in Section 3.11 of the Disclosure Schedule, all such personal property is free and clear of title defects, liens and objections, of any nature whatsoever, and the Borrower has good and marketable title thereto.  The Borrower’s interest in all personal property used in the ordinary course of the Borrower’s business that is material to the Borrower’s business is included in the Collateral.  All such equipment, machinery, furniture and other personal property described in Section 3.11 of the Disclosure Schedule are in safe, fully operable condition, normal wear and tear accepted.

 

  

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Section 3.12     Contracts.  Section 3.12 of the Disclosure Schedule accurately describes all currently effective material contracts, agreements or leases, oral or written, to which the Borrower is a party and under which the Borrower is either potentially obligated to make or expected to receive payments totaling at least $25,000 in any twelve-month period.  True and complete copies of all such contracts have been provided to WWSAF.  In the case of oral contracts, click-through agreements, other agreements or leases, Section 3.12 of the Disclosure Schedule describes the parties thereto, the duration thereof, the payment terms thereof, and all other material terms thereof.  The Borrower is not in material default in the performance of, or in breach of any material provision of, any contract relating to the Borrower’s Business.  The Borrower has no intention, and has no knowledge of any intention by any other party, not to perform its obligations under any such contract.

 

Section 3.13     Accounts Receivable.  The Borrower has delivered to WWSAF a schedule detailing its accounts receivable (the “Accounts Receivable Schedule”) as of January 31, 2016.  To the knowledge of the Borrower, such accounts receivable are collectible by the Borrower in the ordinary course of business and are not subject to any material claim, reduction or offset.  The Accounts Receivable Schedule is true, correct, and complete in all material respects.

 

Section 3.14     Status of Obligations.  Except as set forth in Section 3.14 of the Disclosure Schedule, the Borrower is current in all material corporate obligations, including payments related to any and all taxes and other personal and/or fees, obligations and assessments due and payable.

 

Section 3.15     Truth and Completeness of Statements.  No representation or warranty by the Borrower contained in this Agreement or any other Loan Document, and no statement contained in any certification or other instrument furnished by the Borrower to WWSAF pursuant hereto or in connection with the transactions contemplated hereby contains any untrue statement of material fact, or omits to state a material fact necessary to make the statements contained therein not misleading.  The Borrower has not knowingly failed to disclose to WWSAF any material fact that would adversely affect a reasonably-prudent lender’s decision to extend the financing represented by the Note.

 

Section 3.16     No Notice of Violations.  Except as set forth in Section 3.16 of the Disclosure Schedule, the Borrower has not received any notice of any violation of any federal, state or local law, statute, ordinance, rule, regulation or court or administrative order, decree, injunction or process applicable to its business that has not been remedied as of the current date.

 

Article 4

 

Affirmative Covenants

 

Except with the prior written consent of WWSAF, which consent (unless otherwise explicitly provided herein) may be withheld in its sole discretion, so long as the Loan (including any renewals, amendments, replacements or refinancing), any other indebtedness incurred under this Agreement remain outstanding, in whole or in part, or WWSAF shall have any commitment under this Agreement or the other Loan Documents, the Borrower will comply with each of the following covenants.

 

Section 4.1   Board Meetings.  WWSAF shall receive notice of all meetings of the Borrower’s board of directors (or equivalent governing body) (the “Board”) at the same times and in the same manner as such notice is provided to board members.  Board meetings shall be held no less than quarterly, and any director shall be permitted to participate in a meeting by any means of remote communication permissible under Delaware law.  The Borrower shall invite one representative of WWSAF, who shall be selected by WWSAF in its sole discretion, subject to the limitations set forth below, to attend all meetings of its Board in a nonvoting observer capacity (the “Observer”) and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its Board members at the same time and in the same manner as provided to such Board members.  The Borrower shall reimburse WWSAF for all reasonable out-of-pocket travel expenses and other third-party costs incurred by the Observer in connection with attending meetings of the Board of Directors.

 

  

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Section 4.2   Audit Right.  From and after the occurrence of an Event of Default, WWSAF or its representatives shall have the right, on a quarterly basis and upon giving the Borrower three (3) business days’ notice, to audit the Borrower’s books, records and operations, including the Collateral.  If WWSAF elects to conduct any such audit, the Borrower shall be responsible for third-party costs of such audit not to exceed Nine Hundred Fifty Dollars ($950.00) per person, per day, plus all reasonable out-of-pocket fees and expenses incurred by WWSAF and any of its representatives; provided, however, that the fees for each audit shall not exceed $5,000.

 

Section 4.3   Financial Statements and Reports.  The Borrower shall furnish the following information to WWSAF:

 

(a)     Within twenty (20) days after the end of each calendar month: (i) a report as to the Borrower’s accounts receivable and accounts payable, (ii) a management report of operations, (iii) a certificate signed by the Borrower’s chief financial officer or chief executive officer attesting to the Company’s eligible customer receivables (as determined pursuant to Section 1.7(a)(ii)) as of the end of the calendar month, and (iv) internally prepared financial statements which include an income statement, balance sheet and statement of cash flow, all prepared in accordance with generally accepted accounting principles, consistently applied, as of the end of the calendar month.

 

(b)     Within forty-five (45) days of the end of each quarter of the Borrower’s fiscal year, internally prepared financial statements which include an income statement, balance sheet and statement of cash flow, all prepared in accordance with generally accepted accounting principles, consistently applied, and copies of all state and federal payroll tax filings and state sales tax filings, as applicable.

 

(c)     As soon as available and in any event within ninety (90) days after the end of each of the Borrower’s fiscal years, a copy of the Borrower’s financial statements, which shall include a balance sheet as of the end of such fiscal year and a statement of income and retained earnings and cash flow for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, and all prepared in accordance with generally accepted accounting principles consistently applied, accompanied by data supporting such financial statements and any management letter(s) relating thereto.  Such statements shall be certified by an independent public accounting firm selected by and paid for by the Borrower and acceptable to WWSAF on an audited basis.

 

(d)     Within ten (10) days of filing, a complete and legible signed copy of the Borrower’s federal and state in­come tax returns, with all schedules, prepared and signed by an independent certified public accountant selected by and paid for by the Borrower and reasonably acceptable to WWSAF.

 

For so long as PDN is obligated to file with or furnish to the Securities and Exchange Commission (the “SEC”) quarterly and annual reports (the “SEC Reports”) containing the information described in items (b) and (c) above, the Borrower’s obligation to provide such information shall be deemed satisfied if the Borrower delivers such SEC Reports to WWSAF no later than the first business day following their publication on the SEC’s “EDGAR” filing system.

 

  

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Section 4.4   Other Information.  With reasonable promptness, the Borrower will furnish to WWSAF such additional financial statements, data and information concerning the Collateral and the financial condition of the Borrower as may be reasonably requested by WWSAF from time to time.

 

Section 4.5   Maintenance of Insurance.  The Borrower will maintain insurance on the Collateral in accordance with the requirements contained in this Agreement, the Security Agreement and the Pledge Agreements.

 

Section 4.6   Maintenance of Existence.  The Borrower will preserve and maintain its existence and good standing in the jurisdiction of its formation and qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is required except where the failure to be so qualified would not have a material adverse effect on the financial, properties or operations of the Borrower.

 

Section 4.7   Maintenance of Records.  The Borrower will keep adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial trans­actions of the Borrower.

 

Section 4.8   Maintenance of Property and Collateral.  The Borrower will maintain, keep, and preserve the Collateral in good working order and condition, ordinary wear and tear or replacement excepted.

 

Section 4.9   Notice of Litigation.  The Borrower will notify WWSAF promptly after the commencement thereof of all actions, suits, claims (including environmental claims) and proceedings before any court or governmental depart­ment, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting the Borrower, that, if determined adversely to the Borrower could have a material adverse effect on the financial condition, properties, or operations of the Borrower.

 

Section 4.10     Compliance with Laws.  The Borrower will comply in all respects with all applicable laws, rules, regulations, and orders, such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments, and governmental charges imposed upon it or upon its property, unless (a) the same are being contested in accordance with Section 3.5 hereof, or (b) where the failure to be in such compliance would not have a material adverse effect on the financial condition, properties or operations of the Borrower.

 

Article 5

 

Negative Covenants

 

Except with the prior written consent of WWSAF, which consent (unless otherwise explicitly provided herein) may be withheld in its sole discretion, so long as the Loan (including any renewals, amendments, replacements or refinancing) or any other indebtedness incurred under this Agreement shall remain outstanding (excluding any obligations relating to the Warrants), in whole or in part, or WWSAF shall have any commitment under this Agreement or the other Loan Documents, the Borrower will comply with each of the following covenants.

 

Section 5.1   Certain Limitations.

 

(a)          The Borrower will not make any fundamental changes to its business.

 

  

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(b)         The Borrower will not sell, lease, transfer or otherwise dispose of any asset or assets having value greater than Twenty Thousand Dollars ($20,000.00), except in the ordinary course of business.

 

Section 5.2   Limitation on Transactions with Affiliates.  The Borrower will not (a) enter into any transaction, including, without limitation, the purchase, sale, lease, rental or exchange of property or the rendering of any service, with an affiliate, employee, officer, director or shareholder unless such transaction is entered into in the normal course of business and otherwise on commercially reasonable terms or (b) engage in any transaction not in the normal course of business with any supplier, customer or any other person.

 

Section 5.3   Limitation on Purchases and Acquisitions.  The Borrower will not purchase or acquire any evidence of indebtedness or securities (including stock) of a business or substantially all of the property or assets of any other person or other legal entity, or make any loan, capital contribution or advance to any other person or entity, provided that the Lender’s consent will not be unreasonably withheld or delayed.

 

Section 5.4   Limitation on Merger or Consolidation.  The Borrower will not consolidate with or merge into any other person or acquire by merger or otherwise any other person or permit any other person to consolidate with or merge into it, and will not conduct its business through any other entity.

 

Section 5.5   Liens on Collateral.  The Borrower will not create, incur, as­sume, or suffer to exist, or permit any subsidiary to create, incur, assume or suffer to exist, any lien, mortgage, pledge, en­cumbrance, security interest, attachment or charge of any kind upon the Collateral, except:

 

(a)          liens in favor of WWSAF;

 

(b)          liens for taxes or assessments or other government charges or levies if not yet due and payable or, if due and pay­able, if they are being contested in good faith by appropriate proceedings diligently prosecuted and for which appropriate reserves are maintained;

 

(c)          liens in connection with equipment leases by the Borrower, subject to the prior written consent of WWSAF for any equipment leases in excess of Twenty Thousand Dollars ($20,000.00), which shall not be unreasonably withheld; or

 

(d)          liens to which WWSAF has consented in advance in writing, such consent not to be unreasonably withheld.

 

Section 5.6   No Additional Debt.  The Borrower will not create, incur, assume, or suffer to exist (with respect to future debt), or permit any subsidiary to create, incur, assume, or suffer to exist (with respect to future debt), any additional debt, except:

 

(a)          debt of the Borrower under this Agreement, the Note or any renewals, extensions or refinancing of any of them;

 

(b)          any debts described on the Borrower’s existing financial statements;

 

(c)          debt of the Borrower subordinated on terms satis­factory to WWSAF to the Borrower’s obligations under this Agreement and the Note;

 

  

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(d)         debt to which WWSAF has consented in advance in writing, such consent not to be unreasonably withheld; and

 

(e)         debt secured by liens permitted pursuant to Section 5.5 above.

 

Section 5.7   Sale of Property or Collateral.  The Borrower will not sell, lease, assign, transfer, or otherwise dispose of all or any portion of the Collateral except in the ordinary course of business.

 

Section 5.8   Contingent Liabilities.  The Borrower will not guarantee (including being an accom­moda­tion party on instruments) or assume any indebtedness or other liability of any individual, partnership, corporation, or other organization, except guarantees and endorsements made in connection with the deposit of items for collection or credit in the ordinary course of business.

 

Section 5.9   No Distributions or Repurchases.  The Borrower shall not pay any distributions or repurchase or agree to repurchase any of Borrower’s capital stock.

 

Section 5.10     Minimum Current Ratio.  The minimum current ratio of the Borrower for the immediately preceding semi-annual fiscal period, commencing with the period ending December 31, 2016, as determined from the financial statements for June 30 and December 31 of each year delivered to WWSAF pursuant to Section 4.3 shall not be less than 1.4 to 1; provided that for purposes of this section any deferred revenue shall be excluded in calculating the Borrower’s minimum current ratio.

 

Article 6

 

Events of Default and Remedies

 

Section 6.1   Events of Default.  Each of the following events shall constitute an “Event of Default” hereunder:

 

(a)          The Borrower shall default in making any payment of principal or interest when the same shall become due under the Note or any of the other Loan Documents, and which default shall continue for five (5) days after the due date therefore;

 

(b)         The Borrower shall fail to comply with any term, covenant or agreement of this Agreement, which default shall continue for twenty (20) days from the earlier of:  (i) notice from WWSAF or (ii) the date on which the Borrower first becomes aware of the noncompliance;

 

(c)          Commencement of proceedings under any bankruptcy or insolvency law by or against the Borrower or any other person primarily or secondarily liable under the Note, or in respect thereof, including any person or entity who has pledged or granted to the Lender a security interest or other lien in property on behalf of the Borrower, or an inability to pay its obligations when due;

 

(d)         A lien for the performance of work or the supply of materials is filed against the property of the Borrower and un­satisfied or unbonded for a period of thirty (30) days after the date of filing thereof;

 

(e)         Any material representation or warranty made by the Borrower herein or in any other Loan Document shall fail to be true and correct, or otherwise shall be misleading, when made or fur­nished;

 

  

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(f)          Any material adverse change in the business, operations, properties or condition (financial or otherwise) of the Borrower, or any Collateral, which, in the opinion of WWSAF, acting in good faith, impairs its security or impairs the Borrower’s ability to meet its payment obligations under this Agreement and the Note;

 

(g)         Commencement of any levy or sale upon or execution or other proceedings of any nature, including a foreclosure of a subordinate lien on the assets of the Borrower, whereby the owner shall or may be deprived of title or right of possession to either property or any part thereof;

 

(h)         The Borrower’s dissolution or termination of exis­tence;

 

(i)          Any loss, theft, or damage to the Collateral which is not fully covered by insurance and which, in the opinion of WWSAF acting in good faith, materially impairs its security or increases its risk; and

 

(j)          Subject to the Borrower’s right to contest pursuant to Section 3.5, failure to pay any tax or municipal obligation when due which is an obligation of the Borrower. Nothing con­tained in this Section 6.1 shall prevent the Borrower from con­testing in good faith any tax or assessment assessed against the Borrower so long as adequate reserves for payment of the same have been made and verified to WWSAF.

 

Section 6.2   Remedies Upon Default.

 

(a)          If an Event of Default shall occur, WWSAF may declare the entire indebtedness evidenced by the Note to be immediately due and payable, without presentment, protest, demand or notice of any kind, all of which are hereby expressly waived by the Borrower; and may pursue any and all remedies provided for hereunder and in any one or more of the Loan Documents or at law or in equity, including, without limitation, the following:

 

(i)   Exercise all rights of a secured party under the Uniform Commercial Code, or otherwise, with respect to the Col­lateral;

 

(ii)      Require the Borrower to assemble the Collateral and make it available to WWSAF at a place designated by WWSAF that is reasonably convenient; and

 

(iii)          Setoff and apply against any indebtedness or liability of the Borrower to WWSAF any indebtedness owing from WWSAF to the Borrower at any time and from time to time either before or after maturity and without demand upon or notice to anyone.

 

(b)          If in the event of the sale or other disposition of the Collateral the proceeds thereof are insufficient to pay all amounts to which WWSAF is legally entitled, the Borrower shall be liable for the deficiency and the reasonable fees of any attorneys employed by WWSAF to collect such deficiency.  The Borrower agrees that if any notification of intended disposition of any of the Collateral is required by law, such notification shall be deemed reasonably and properly given if deposited in the mails, first class postage prepaid, addressed as provided in this Agreement at least ten (10) days before such intended disposition.

 

(c)          Upon default by the Borrower in any of the covenants or agreements contained in this Agreement or in any other Loan Document providing for the payment of taxes, the maintenance of insurance, or otherwise relating to the Collateral, WWSAF may, in its sole discretion, advance such sums and costs and take such other steps as WWSAF may deem necessary or advisable to protect the Collateral.  All sums advanced or paid by WWSAF for such purposes shall be payable by the Borrower to WWSAF on demand, as advances or loans from WWSAF to the Borrower under this Agreement, and shall be part of the principal obligations deemed to have been an advance of the Loans.

 

  

15

  

 

(d)         No remedy conferred upon or reserved to WWSAF in the Loan Documents is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or in any other Loan Document or now or hereafter ex­isting at law or in equity or by statute and the exercise of any remedy or remedies shall not be an election of the remedies.  The remedies and rights of WWSAF may be exercised concurrently, alone or in any combination.

 

Section 6.3   Cooperation of the Borrower.  The Borrower agrees to cooperate with WWSAF in effectuating the purposes hereof notwithstanding any unanticipated inability of the Borrower to pay the Note or otherwise perform its obligations under this Agreement or any other Loan Document.

 

Article 7

 

Miscellaneous

 

Section 7.1      Termination.  This Agreement shall terminate automatically in the event the Closing has not occurred by March 31, 2016, or such later date as the Borrower and WWSAF otherwise agree in writing.

 

Section 7.2      Amendments; Waivers.  No term of this Agreement may be amended, and the observance of any term may not be waived (either generally or in a particular instance, and either retroactively or prospectively) without the written consent of the party against whom such amendment or waiver is to be enforced. Neither the failure of WWSAF to exercise, nor the delay of WWSAF in exercising, any right, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial ex­ercise or any right, power or privilege preclude any other or further exercise of any other right, power, or privilege.

 

Section 7.3   Assignment of Agreement by the Borrower.  Neither this Agreement nor the proceeds of the Note may or shall be assignable by the Borrower without the prior written consent of WWSAF.

 

Section 7.4   Assignment of Agreement by the Lender.  This Agreement may be assigned by WWSAF and its successors and assigns in connection with the assignment of the Note.  The con­sent of the Borrower shall not be required for any such assignment.  The Borrower agrees to do any act or execute any additional documents reasonably requested by the assigning party in connection with such an as­signment, including, without limitation, note(s), mortgage(s) and other security instruments, and a certificate as to the amount of indebtedness evidenced by the Note.

 

Section 7.5   Notices.  Any demand upon or notice to the Borrower hereunder shall be effective when delivered by hand or when properly deposited in the mails postage prepaid, or sent by facsimile transmission, receipt acknowledged, or delivered to an overnight courier, addressed to the Borrower at the address shown below or as it appears on the books and records of WWSAF.  Demands or notices addressed to any other address at which WWSAF customarily communicates with the Borrower also shall be effective.  Any notice by the Borrower to WWSAF shall be given to WWSAF at the address shown below or such other address as WWSAF may advise the Borrower in writing:

 

  

16

  

 

	
  

	
If to WWSAF:

	
White Winston Select Asset Funds

	
  

	
265 Franklin St., Suite 1702

	
  

	
Boston, MA 02110

	
  

	
Attn:  Todd M. Enright

	
  

	
Fax: 801-938-7540

	
  

	
with a copy to:

	
McCarter & English, LLP

	
  

	
265 Franklin St.

	
  

	
Boston, MA 02110

	
  

	
Attention: Burt Winnick

	
  

	
Fax: 617-326-3078

	
  

	
If to the Borrower

	
Professional Diversity Network

	
  

	
801 West Adams Street, Suite 600

	
  

	
Chicago, IL 60607

	
  

	
Attention: James Kirsch

	
  

	
With a copy to:

	
Greenberg Traurig, LLP

	
  

	
77 West Wacker Drive, Suite 3100

	
  

	
Chicago, IL 60601

	
  

	
Attn:  Stacey T. Kern

	
  

	
Email: kerns@gtlaw.com

	
  

	
Fax: 312-456-8435

Section 7.6   Agreement Not Intended as Partnership or Agency.  The parties expressly disclaim any intention to create a partnership or joint venture pertaining to the subject matter of this Agreement.  The Borrower and WWSAF intend that their relationship shall be solely that of borrower and lender, whether that relationship is relevant for purposes of the parties’ dealings between them­selves or with third persons.  Neither the Borrower nor WWSAF shall be deemed an agent of the other for any purpose.

 

Section 7.7   Agreement to Govern.  In the event of any material inconsistencies between this Agreement and the Note, the Note shall govern and control except as modified hereby.  In the event of any material inconsistencies between this Agreement and any of the other Loan Documents, this Agreement shall govern and control.  This Agreement supersedes the Term Sheet among the parties dated January 21, 2016, except as to the provisions in Section 14 of the Term Sheet, which shall continue in full force and effect.

 

Section 7.8   Costs, Expenses, and Taxes.  The Borrower shall pay within ten (10) business days all reasonable out-of-pocket costs and expenses in connection with the execution, delivery, filing, recording, ad­ministration, and enforcement of the Loan and any Loan Documents, including, without limitation, the reasonable fees and out-of-pocket ex­penses of counsel for WWSAF, and local counsel who may be retained by said counsel, with respect thereto and with respect to advising WWSAF as to their rights and responsibilities under any of the Loan Documents, and all costs and expenses, if any, in connection with the enforcement of or collection of amounts due pursuant to any of the Loan Documents.  The legal fees of WWSAF’s counsel shall be calculated on a time spent basis, based upon the standard hourly rates of such counsel generally charged to clients of that firm on similar matters.  In addition, the Borrower shall pay any and all stamp and other taxes and reasonable fees payable or determined to be payable in connection with the execution, delivery, filing, and recording of any of the Loan Documents and the other documents to be delivered under any such Loan Documents, title insurance premiums, survey and site assessment costs, fees of the Lender’s appraiser, and brokerage fees or commissions, and agrees to indemnify and save WWSAF harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such fees, premiums, costs and charges.

 

  

17

  

 

Section 7.9   Severability of Terms.  If any term, covenant or condition of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

 

Section 7.10     Headings.  The headings in the Loan Documents are included for the convenience of reference only and shall not constitute a part of the applicable Loan Documents for any other purpose.

 

Section 7.11     Survival.  This Agreement shall survive the Closing and each and every one of the obligations and undertak­ings of the Borrower set forth in this Agreement shall be continuing obligations and undertakings and shall not cease or terminate until the entire outstanding principal amount of the Loan, together with all interest and fees due thereon and any other amounts which may be due pursuant to this Agreement, shall have been paid in full, and until the obligations and un­dertakings of the Borrower shall have been fully completed and discharged.

 

Section 7.12     Governing Law.  This Agreement and any dispute between or among the parties arising from or related to this Agreement, the transactions contemplated hereby or the Loan, shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to such jurisdiction’s principles of conflict of laws.  Each party irrevocably agrees that any legal action, suit or proceeding brought by it and in any way arising out of or relating to this Agreement, the transactions contemplated hereby or the Loan, must be brought solely and exclusively in the United States District Court for the District of Massachusetts or in the state courts of the Commonwealth of Massachusetts, and irrevocably accepts and submits to the sole and exclusive jurisdiction of each of the aforesaid courts in personam, generally and unconditionally with respect to any action, suit or proceeding brought by it or against it by any other party.

 

Section 7.13     Captions; Headings.  The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience.  They do not define, limit, construe or describe the scope or intent of such sections, nor in any way affect this Agreement or have any substantive effect.

 

Section 7.14     Counterparts; Execution.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

Section 7.15     Entire Agreement.  This Agreement, along with Section 14 of the Term Sheet as referenced by Section 7.7, above, embodies the entire agreement and understanding between the parties relating to the subject matter hereof and there are no covenants, promises, agreements, conditions or understandings, oral or written, except as herein set forth.

 

  

18

  

 

Section 7.16     Neutral Construction; No Coercion or Duress.  This Agreement is the product of arm’s-length negotiations between the parties, and each of the parties has had the opportunity to obtain, and has obtained, the advice of counsel with respect to the matters set forth herein. Each of the parties agrees that no party will claim that any ambiguity in this Agreement shall be construed against the other party or against the drafter of this Agreement.  Each party hereby represents and warrants to the others that such party is fully aware of the terms set forth in this Agreement and has voluntarily, and without coercion or duress of any kind, entered into this Agreement intending to be legally bound by its terms.  The Borrower represents and declares that in executing this Agreement, it is relying solely upon its own judgment, belief and knowledge, and the advice or recommendations of its own independently chosen counsel considering the nature, extent, duration of their rights and claims hereunder and that it has not been influenced to any extent whatsoever in executing this Agreement by any representations, statements or omissions pertaining to any of the foregoing matters by WWSAF or any persons representing WWSAF.

 

THE BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND THE LENDER RESERVES ALL RIGHTS TO PREJUDGMENT REMEDIES TO WHICH IT MAY BE ENTITLED.  FURTHER, THE BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENT, STAY, REDEMPTION AND MORATORIUM LAWS, NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAW.  THE BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF TRIAL BY JURY, NOW IN FORCE OR WHICH MAY HEREAFTER BECOME LAW.

 

 [Signature Page Follows]

 

  

19

  

 

IN WITNESS WHEREOF, the undersigned have executed or caused this Amended and Restated Master Credit Facility and Loan Modification Agreement to be executed under seal as of the date first set forth above.

 

PROFESSIONAL DIVERSITY NETWORK, INC.

 

	
By:

	
/s/ James R. Kirsch

	  	
Witness:

	
/s/ David Mecklenburger

	 	 	 	 	 
	
Name:

	
James R. Kirsch

	  	
Name:

	
David Mecklenburger

	 	 	 	 	 
	
Title:

	
CEO

	  	  	  
	  	  	  	  	  
	  	  	  	  
	
NAPW, INC.

	  	  	  
	  	  	  	  
	  	  	  	  
	
By:

	
/s/ James R. Kirsch

	  	
Witness:

	
/s/ David Mecklenburger

	 	 	 	 	 
	
Name:

	
James R. Kirsch

	  	
Name:

	
David Mecklenburger

	 	 	 	 	 
	
Title:

	
CEO

	  	  	  

 

 

	
NOBLE VOICE LLC

	  
	  
	
By:

	
/s/ James R. Kirsch

	  	
Witness:

	
/s/ David Mecklenburger

	 	 	 	 	 
	
Name:

	
James R. Kirsch

	  	
Name:

	
David Mecklenburger

	 	 	 	 	 
	
Title:

	
CEO

	  	  	  

 

 

	
COMPLIANT LEAD LLC

	  
	  
	
By:

	
/s/ James R. Kirsch

	  	
Witness:

	
/s/ David Mecklenburger

	 	 	 	 	 
	
Name:

	
James R. Kirsch

	  	
Name:

	
David Mecklenburger

	 	 	 	 	 
	
Title:

	
CEO

	  	  	  

 

  

  

  

 

	
WHITE WINSTON SELECT ASSET FUNDS, LLC

	  
	  
	
By:

	
/s/ Todd M. Enright

	  	
Witness:

	
/s/ Benjamin M. Hron

	 	
Todd M. Enright, Manager

	 	 	 
	  	 	  	
Name:

	
Benjamin M. Hron

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