Document:

Exhibit 10.1

 

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

 

CONVERTIBLE
PROMISSORY NOTE

 

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

 

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

 

1.                 
Basic Terms.

 

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

 

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

 

2.                 
Conversion and Repayment.

 

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

 

     

     

    

 

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

 

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

 

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

 

3.                 
Representations and Warranties.

 

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

 

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

 

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

 

    2. 

     

    

 

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

 

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

 

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

 

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

 

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

  

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

 

    3. 

     

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    4. 

     

    

 

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

 

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

 

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

 

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

 

4.                 
Events of Default.

 

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

 

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

 

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

 

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

 

    5. 

     

    

 

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

 

5.                 
Miscellaneous Provisions.

 

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

 

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

 

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

 

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

 

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

 

    6. 

     

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    7. 

     

    

 

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

 

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

 

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

 

[Signature
page follows]

 

    8. 

     

    

 

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

 

	 	VALQARI LLC
	 	 	 
	 	By:	/s/ Ryan Walsh
	 	 	Ryan Walsh

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

 

SIGNATURE PAGE TO

VALQARI LLC

CONVERTIBLEPROMISSORY NOTEExhibit 4.2

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