Document:

bfdi_ex103.htm

Exhibit 10.3

 

AGREEMENT OF SUBORDINATION AND ASSIGNMENT

 

In order to induce ROSENTHAL & ROSENTHAL, INC., a New York corporation (hereinafter called "Lender"), its successors, or assigns, from time to time to make loans and advances and extend other financial accommodations to or for the account of Brekford Corp., a Delaware corporation having a principal place of business at 7020 Dorsey Road, Bldg C, Hanover, MD 21076, its successors or assigns (hereinafter called "Debtor),___________ an individual having a residence address at ____________, (hereinafter called the "Creditor"), and who, if two or more in number,

 

shall be jointly and severally bound hereunder, hereby agrees that all indebtedness now or hereafter due to Creditor from Debtor, and all interest accrued or that may hereafter accrue thereon (the “Junior Debt”) shall not be payable, and that no payment on account of the Junior Debt (except for regularly scheduled payments of principal and interest, provided that no Default has occurred and is continuing), nor any security therefor, nor any loan from Debtor, nor any offset by Debtor, has been or shall be received, accepted or retained by Creditor unless and until Debtor has indefeasibly paid and satisfied in full all of its Obligations (as defined in the Financing Agreement between Debtor and Lender, dated May 27, 2014);

 

and Debtor agrees not to make payment or to give any security to Creditor except in conformity herewith and in the event that it has been or hereafter is granted any security interest in or collateral for the Junior Debt such security interest in and/or collateral for is hereby deemed to be and shall be subject and subordinate in all respect to the interests of Lender therein and Creditor shall not be entitled to exercise any remedies as secured Lender with respect thereto. Creditor waives any and all notice of the creation, modification, renewal or extension or accrual of any Obligations. Creditor hereby consents that, without notice to or further assent by Creditor, the Obligations may from time to time, in whole or in part, be renewed, extended, modified, compromised or released by Lender, as it may deem advisable, and that any collateral for the Obligations may from time to time, in whole or in part, be exchanged, sold, surrendered or released by Lender, as it may deem advisable, all without impairing, abridging, affecting or releasing the subordination contained in this agreement.

 

Creditor does hereby transfer and assign the Junior Debt to Lender as collateral security for the Obligations, with the full and irrevocable right on the part of Lender, in its own name or in the name of Creditor, to collect and enforce the Junior Debt by suit, proof of debt in bankruptcy, or other liquidation proceedings or any reorganization or arrangement, or otherwise and to vote the full amount of the Junior Debt in any such proceedings, reorganization or arrangement for or against any proposal or resolution, for a trustee or trustees or for a committee of creditors or for the acceptance or rejection of any proposed arrangement, plan or reorganization, wage earners' plan, composition, settlement or extension.  Should any payment or distribution or security or proceeds on or for the Junior Debt be received by Creditor for or on account of the Junior Debt (except for regularly scheduled payments of principal and interest, provided no Default has occurred and is continuing), prior to the satisfaction of the Obligations, Creditor will forthwith assign, endorse and deliver same to Lender, in precisely the form received (except for Creditor's endorsement where necessary), for application to payment of the Obligations, and until so delivered, same shall be held in trust by Creditor as the property of Lender; in the event of the failure of Creditor to endorse or assign any security or instrument for the payment of money, so received by Creditor or payable to Creditor's order, Lender or any officer or employee thereof is hereby irrevocably constituted and appointed attorney-in-fact for Creditor, with full power to make any such endorsement or assignment and with full power of substitution.

 

Creditor represents and warrants to Lender that Creditor is solvent and has granted no security interest in and has made no prior transfer or assignment of the Junior Debt; Creditor further covenants and agrees that Creditor will grant no security interest in or transfer of (except to Lender) any Junior Debt, whether now existing or hereafter arising unless and until the Obligations have been paid in full. Creditor and Debtor represent to Lender that the presently outstanding amount of the Junior Debt is $250,000, which is owing without counterclaim, defense or offset.  Creditor hereby agrees to endorse to the order of Lender and deliver to Lender any note or other instrument, which now or hereafter evidences any or all the Junior Debt, or, at the option of Lender, to mark prominently each such note or instrument with a legend, referring to this agreement, in form and substance satisfactory to Lender. Debtor and Creditor each agree, upon request of Lender, to execute such further documents and instruments, as Lender may require.

 

Debtor hereby agrees that it will render to Lender upon demand from time to time a statement of the unpaid balance of the Junior Debt and that it will duly comply with and perform each and every of the terms of this agreement on its part required to be performed.  Debtor agrees that in any action by Lender to enforce payment of the Junior Debt by Debtor, Debtor shall not assert against Lender any offsets, defenses or counterclaims it may have against Creditor or Lender. DEBTOR AND CREDITOR AGREE THAT THEIR BOOKS AND RECORDS WILL APPROPRIATELY SHOW THAT THE JUNIOR DEBT IS SUBJECT TO THIS AGREEMENT.  CREDITOR AND DEBTOR WAIVE A TRIAL BY JURY AND A RIGHT TO INTERPOSE ANY COUNTERCLAIM OR OFFSET OF ANY NATURE OR DESCRIPTION IN ANY LITIGATION ARISING OUT OF OR RELATING TO THE JUNIOR DEBT OR THIS SUBORDINATION.  In the event Lender shall retain or engage an attorney or attorneys to collect or enforce or protect its interests with respect to this agreement or the Junior Debt, all of the costs and expenses of such collection, enforcement or protection, including reasonable attorneys' fees, shall be payable by each Creditor or Debtor against whom such collection, enforcement or protection is sought.

 

In the event of a breach by either Debtor or Creditor in the performance of any of the terms of this agreement, all of the Obligations shall, any other agreement to the contrary notwithstanding and without notice or demand, become immediately due and payable, at Lender's option.

 

No waiver shall be deemed to be made by Lender of any of its rights hereunder unless same shall be in writing and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair Lender's rights and/or the obligations of Creditor to it in any other respect or at any other time, nor shall same establish a course of conduct. This agreement may not be modified or amended without the prior written consent of Lender.

 

Each Creditor or Debtor not a resident of the State of New York or qualified to do business in New York, hereby irrevocably consents to the jurisdiction of the Courts of the State of New York and of any Federal Court located in such State in connection with any action or proceeding arising out of or relating to this agreement or the Junior Debt.  In any such litigation such Creditor or Debtor, as the case may be, waives personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to such party at the last known address appearing on the records of Lender.  Within 30 days after such mailing, the party so served shall appear or answer to such summons, complaint or other process.  Should the party so served fail to appear or answer within said 30-day period, such party shall be deemed in default and judgment may be entered by Lender against such party for the amount as demanded in any summons, complaint or other process so served.

 

This agreement shall be binding upon the undersigned and the legal representatives, successors and assigns of the undersigned and shall be governed by and construed in accordance with the Laws of the State of New York.

 

[signature page to follow on page 3]

  

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IN WITNESS WHEREOF, each of the undersigned has caused these presents to be properly executed on May 27, 2014

 

	 	BREKFORD CORP. (Debtor) 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	
 

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

  

  

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	$250,000  	 	New York, NY                          May 27, 2014

 

For Value Received ON DEMAND after date we promise to pay to the order of ______________

 

Two Hundred Fifty Thousand Dollars and No Cents

 

At                                              

 

BREKFORD CORP. (Debtor)

 

By: /s/ Rodney Hillman

Rodney Hillman, President/COO

The undersigned and each of them hereby waives presentment, demand, protest, notice of protest and notice of dishonor and consents without notice to any and all extensions of time or terms of payment made by the holder of this note.

 

PAY TO THE ORDER OF ROSENTHAL & ROSENTHAL, INC.

 

/s/                                            

___________________

 

 

3pdmt_ex41.htm

Exhibit 4.1

 

For U.S. Investors:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY.  HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.

For Non-U.S. Investors:

THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  ACCORDINGLY, NONE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT.

 

10% SECURED CONVERTIBLE PROMISSORY NOTE

 

 

Placer Del Mar Ltd.

 

 

DUE _______ __, 2014

 

	
Original Issue Date: May __, 2014

	
US$_________

This Secured Convertible Promissory Note is one of a series of duly authorized and issued secured convertible promissory notes of Placer Del Mar Ltd., a Nevada corporation (the “Company” or “Pubco”), designated its 10% Secured Convertible Promissory Notes due _______ __, 2014 (the “Note”), issued to ___________________ (together with its permitted successors and assigns, the “Holder”) in accordance with exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to a Securities Purchase Agreement, dated May __, 2014 (the “Purchase Agreement”) between the Company and the Holder.  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

 

  

  

  

 

Article I.

 

Section 1.01                       Principal and Interest.  (a) For value received, the Company hereby promises to pay to the order of the Holder, in lawful money of the United States of America and in immediately available funds the principal sum of ________________________________ Dollars ($_________) on _______ __, 2014 (the “Maturity Date”)

 

(b) The Borrower further promises to pay interest on the unpaid principal amount of this Note at a rate per annum equal to ten percent (10%), payable on the Maturity Date.  Interest will be computed on the basis of a 360-day year of twelve 30-day months for the actual number of days elapsed.

 

(c) On the Maturity Date, the entire unpaid principal amount of this Note along with accrued interest shall be paid to the Holder, unless this Note is converted in accordance with Section 1.03 herein.

 

(d) The Company may not prepay any portion of the principal amount of this Note without the prior written consent of the Holder.

 

Section 1.02                       [RESERVED]

Section 1.03                       Mandatory Conversion.  (a) Upon the closing of the Merger and the simultaneous closing on at least the Minimum PIPE amount, all of the outstanding principal amount of this Note (along with accrued and unpaid interest) shall automatically, without the necessity of any action by the Holder or the Company, convert into (i) Units of Pubco at a price (the “Conversion Price”) of $0.30 per Unit, and (ii) Bridge Warrants of Pubco to purchase such number of shares of Common Stock of Pubco at a price of $0.30 per share as is equal to the number of Units of Pubco into which the Note is convertible pursuant to (i) above, all subject to adjustment as provided herein.  No fraction of Units, or scrip representing fractions thereof will be issued on conversion, but the number of Units shall be rounded to the nearest whole number of Units.

(b) Upon the closing of the Merger and the simultaneous closing on at least the Minimum PIPE amount, the holder of this Note shall be entitled to receive the Bridge Warrants of Pubco.

 

(c) Upon automatic conversion of the Notes, the Holder shall become a party to all agreements and instruments executed by the investors in the PIPE, including, but not limited to, the Registration Rights Agreement.

 

(d) The date upon which the conversion shall be effective (the “Conversion Date”) shall be deemed to be the date on which the Merger closes and Pubco closes on at least the Minimum PIPE amount.  The number of Units issuable upon conversion of this Note shall equal the quotient obtained by dividing (x) the outstanding principal amount of this Note on the Conversion Date (along with accrued and unpaid interest) by (y) the Conversion Price then in effect.  The calculation by Pubco of the number of Units to be received by the Holder upon conversion hereof, and of the applicable Conversion Price, shall be conclusive absent manifest error.

 

(e) Maximum Conversion.  Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the Holder hereof to the extent (but only to the extent) that such conversion would cause the Holder and its affiliates (if they are not, prior to such conversion, already beneficial owners of greater than 4.99% (the “Maximum Percentage”) of Pubco’s outstanding Common Stock) to beneficially own in excess of the Maximum Percentage of Pubco’s outstanding Common Stock; provided, however, that the Holder may waive the limitation imposed by this subsection, and/or increase the Maximum Percentage to some other amount, upon at least sixty-one (61) days prior written notice to Pubco.  For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  The limitations contained in this paragraph shall apply to a successor Holder of this Note.

 

  

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Section 1.04                       Reservation of Common Stock.  As set forth in the Purchase Agreement, Pubco shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of conversion of this Note, that number of shares of Common Stock equal to the number of shares of Common Stock into which the Note is convertible based upon the then applicable Conversion Price, including the shares of Common Stock underlying the Units and the Bridge Warrants.

 

Section 1.05                       Absolute Obligation/Ranking.  Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and liquidated damages (if any) on, this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereinafter issued pursuant to the Purchase Agreement.

 

Section 1.06                       Paying Agent and Registrar.  Initially, the Company will act as paying agent and registrar.  The Company may change any paying agent, registrar, or Company-registrar by giving the Holder not less than ten (10) business days’ written notice of its election to do so, specifying the name, address, telephone number and facsimile number of the paying agent or registrar.  The Company may act in any such capacity.

 

Section 1.07                       Different Denominations.  This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same.  No service charge will be made for such registration of transfer or exchange.

 

Section 1.08                       Investment Representations.  This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

 

Section 1.09                       Reliance on Note Register.  Prior to due presentment to the Company for transfer or conversion of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 1.10                       Security; Other Rights.  The obligations of the Company to the Holder under this Note are secured pursuant to the General Security Agreement of even date herewith by and among the Companies and the Company on behalf of the Holders of the Notes.  In addition to the rights and remedies given it by this Note, the Purchase Agreement and the General Security Agreement, the Holder shall have all those rights and remedies allowed by applicable laws.  The rights and remedies of the Holder are cumulative and recourse to one or more right or remedy shall not constitute a waiver of the others.

 

 

Article II.

 

Section 2.01                       Amendments and Waiver of Default.  Except as otherwise provided herein, the Note may not be amended without the consent of the Holder.

 

  

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Article III.

 

Section 3.01                       Events of Default.  Each of the following events shall constitute a default under this Note (each an “Event of Default”), except as related to:

 

(a) failure by the Company to pay principal amount due hereunder within five (5) days of the date such payment is due;

 

(b) any event of default by any of the Companies with respect to the Bridge Loan

 

(c)  failure by the Company for five (5) days after notice to it to comply with any of its other agreements in the Note;

 

(d) an Event of Default specified in the General Security Agreement shall have occurred and be continuing, or the General Security Agreement shall fail to remain in full force and effect, or any action shall be taken to discontinue the General Security Agreement or to assert the invalidity thereof;

 

(e) the Company shall:  (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any petition, answer or other document seeking:  (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction;

 

(f) any case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 3.01(d) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of sixty (60) days;

 

(g) default shall occur with respect to any indebtedness for borrowed money of the Company or under any agreement under which such indebtedness may be issued by the Company and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of such indebtedness for which such default shall have occurred exceeds $25,000, except for any default related to indebtedness existing on the date hereof and set forth in Schedule A attached hereto, and except for disputed obligations with respect to which the Company has made adequate reserves for payment, in the opinion of the Company’s Treasurer;

 

  

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(h) default shall occur with respect to any contractual obligation of the Company under or pursuant to any contract, lease, or other agreement to which the Company is a party and such default shall continue for more than the period of grace, if any, therein specified, if the aggregate amount of the Company’s contractual liability arising out of such default exceeds or is reasonably estimated to exceed $25,000, except for any default related to obligations existing on the date hereof and set forth in Schedule A attached hereto and except for disputed obligations with respect to which the Company has made adequate reserves for payment, in the opinion of the Company’s Treasurer;

 

(i) final judgment for the payment of money in excess of $25,000 shall be rendered against the Company and the same shall remain undischarged for a period of twenty (20) days during which execution shall not be effectively stayed, except for any judgment related to obligations existing on the date hereof and set forth in Schedule A attached hereto;

 

(j) any event of default of the Company under any agreement, note, mortgage, security agreement or other instrument evidencing or securing indebtedness that ranks senior in priority to, or pari passu with, the obligations under this Note and the Purchase Agreement, except for any default related to obligations existing on the date hereof and set forth in Schedule A attached hereto;

 

(k) the Common Stock shall not be eligible for quotation on or quoted for trading on the OTC Markets and shall not again be eligible for and quoted for trading thereon within five (5) trading days;

 

(l) any breach by the Company of any of its representations or warranties under the Purchase Agreement; or

 

(m) any default, whether in whole or in part, shall occur in the due observance or performance of any obligations or other covenants, terms or provisions to be performed under this Note or the Purchase Agreement which is not cured by the Company within five (5) days after receipt of written notice thereof; or

 

Section 3.02                       If any Event of Default specified in clauses 3.01(e) or (f) occurs, then the full principal amount of this Note, together with any other amounts owing in respect thereof, to the date of the Event of Default, shall become immediately due and payable without any action on the part of the Holder, and if any other Event of Default occurs, the full principal amount of this Note, together with any other amounts owing in respect thereof, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash.  Commencing five (5) days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, interest on this Note shall begin to accrue at the rate of interest specified in Section 1.01(b) PLUS two percent (2%) per annum, or such lower maximum amount of interest permitted to be charged under applicable law.  All Notes for which the full amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company.  The Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment under this Section shall have been received by it.  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

 

Article IV.

 

Section 4.01                       Negative Covenants.  So long as this Note shall remain in effect and until any outstanding principal and interest and all fees and all other expenses or amounts payable under this Note and the Purchase Agreement have been paid in full, unless all Holders shall otherwise consent in writing, the Company shall not:

 

  

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(a) Additional Indebtedness.  Incur, create, assume, guaranty or permit to exist any indebtedness, except for indebtedness (i) incurred in the ordinary course of business, or (ii) created as a result of this Note or the Purchase Agreement, or other Notes issued under the Purchase Agreement.

 

(b) Liens.  Create, incur, assume or permit to exist any lien on any property or assets (including stock or other securities of the Company) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:

 

(i) liens on property or assets of the Company existing on the date hereof and set forth in Schedule C attached hereto, provided that such liens shall secure only those obligations which they secure on the date hereof;

 

(ii) any lien created under this Note or the Purchase Agreement;

 

(iii) any lien existing on any property or asset prior to the acquisition thereof by the Company, provided that

 

1) such lien is not created in contemplation of or in connection with such acquisition and

 

2) such lien does not apply to any other property or assets of the Company;

 

(iv) liens for taxes, assessments and governmental charges;

 

(v) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s or other like liens arising in the ordinary course of business and securing obligations that are not due and payable;

 

(vi) pledges and deposits made in the ordinary course of business in compliance, with workmen’s compensation, unemployment insurance and other social security laws or regulations;

 

(vii) deposits to secure the performance of bids, trade contracts (other than for indebtedness), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(viii) zoning restrictions, easements, licenses, covenants, conditions, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business and minor irregularities of title that, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company;

 

(ix) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Company, provided that

 

1) such security interests secure indebtedness permitted by this Note,

 

2) such security interests are incurred, and the indebtedness secured thereby is created, within 90 days after such acquisition (or construction),

 

  

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3) the indebtedness secured thereby does not exceed 85% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and

 

4) such security interests do not apply to any other property or assets of the Company;

 

(x) liens arising out of judgments or awards (other than any judgment that constitutes an Event of Default hereunder) in respect of which the Company shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review, provided the Company shall have set aside on its books adequate reserves with respect to such judgment or award; and

 

(xi) deposits, liens or pledges to secure payments of workmen’s compensation and other payments, public liability, unemployment and other insurance, old-age pensions or other social security obligations, or the performance of bids, tenders, leases, contracts (other than contracts for the payment of money), public or statutory obligations, surety, stay or appeal bonds, or other similar obligations arising in the ordinary course of business.

 

(d) Dividends and Distributions.  In the case of the Company, declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or set aside any amount for any such purpose; provided, however, that the Company may declare and pay the Forward Split Dividend (defined below).

 

(e) Limitation on Certain Payments and Prepayments.

 

(i) Pay in cash any amount in respect of any indebtedness or preferred stock that may at the obligor’s option be paid in kind or in other securities; or

 

(ii) Optionally prepay, repurchase or redeem or otherwise defease or segregate funds with respect to any indebtedness of the Company, other than for senior indebtedness existing on the date hereof and set forth in Schedule B attached hereto, indebtedness under this Note or the Purchase Agreement.

 

 

Article V.

 

[RESERVED]

 

Article VI.

 

Section 6.01                       Anti-dilution.  Adjustment of Conversion Price.  The Conversion Price shall be adjusted from time to time as follows:

 

(a) Adjustment of Conversion Price and Number of Units and Bridge Warrants upon Issuance of Common Stock.  If at any time after the Original Issue Date that this Note remains issued and outstanding, Pubco issues or sells, or is deemed to have issued or sold, any shares of Common Stock (including shares of Common Stock in the PIPE, if any) other than upon issuance, exercise or conversion of the Other Securities (as defined herein) for a consideration per share less than a price (the “Applicable Price”) equal to the Conversion Price in effect immediately prior to such issuance or sale (the “Dilutive Issuance”), then immediately after such issue or sale the Conversion Price then in effect shall be reduced to an amount equal to such consideration per share, provided that in no event shall the Conversion Price be reduced below $0.001.

 

  

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(b) Effect on Conversion Price of Certain Events.  For purposes of determining the adjusted Conversion Price under Section 6.01(a) above, the following shall be applicable:

 

(i) Issuance of Options.  If after the date hereof while the Note remains issued and outstanding Pubco in any manner grants any rights, warrants or options to subscribe for or purchase Common Stock or convertible securities (“Options”), other than Other Securities, and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange of any convertible securities issuable upon exercise of any such Option is less than the Conversion Price then in effect, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share.  For purposes of this Section 6.01(b)(i), the lowest price per share for which one share of Common Stock is issuable upon exercise of such Options or upon conversion or exchange of such convertible securities shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by Pubco with respect to any one share of Common Stock upon the granting or sale of the Option, upon exercise of the Option or upon conversion or exchange of any other convertible security other than this Note issuable upon exercise of such Option.  No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock or of such convertible securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such convertible securities.

 

(ii) Issuance of Convertible Securities.  If Pubco in any manner issues or sells any convertible securities after the Original Issue Date while this Note remains issued and outstanding, other than Other Securities, and the lowest price per share for which one share of Common Stock is issuable upon the conversion or exchange thereof is less than the Conversion Price then in effect, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by Pubco at the time of the issuance or sale of such convertible securities for such price per share.  For the purposes of this Section 6.01(b)(ii), the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by Pubco with respect to one share of Common Stock upon the issuance or sale of the convertible security and upon conversion or exchange of such convertible security.  No further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such convertible securities, and if any such issue or sale of such convertible securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant to other provisions of this Section 6.01(b), no further adjustment of the Conversion Price shall be made by reason of such issue or sale.

 

(iii) Change in Option Price or Rate of Conversion.  If the purchase price provided for in any Options issued while this Note remains issued and outstanding, the additional consideration, if any, payable upon the issue, conversion or exchange of any convertible securities, or the rate at which any convertible securities are convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or convertible securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold and the number of shares of Common Stock issuable upon conversion of this Note shall be correspondingly readjusted.  For purposes of this Section 6.01(b)(iii), if the terms of any Option or convertible security that was outstanding as of the Original Issue Date are changed in the manner described in the immediately preceding sentence, then such Option or convertible security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.  No adjustment pursuant to this Section 6.01(b) shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

 

  

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(c) Effect on Conversion Price of Certain Events.  For purposes of determining the adjusted Conversion Price under Sections 6.01(a) and 6.01(b), the following shall be applicable:

 

(i) Calculation of Consideration Received.  If any Common Stock, Options or convertible securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefore will be deemed to be the net amount received by Pubco therefore.  If any Common Stock, Options or convertible securities are issued or sold for a consideration other than cash, the amount of such consideration received by Pubco will be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by Pubco will be the market price of such securities on the date of receipt of such securities (measured by the closing sale price of such securities on the Over-the-Counter Bulletin Board or its principal trading market).  If any Common Stock, Options or convertible securities are issued to the owners of the non-surviving entity in connection with any merger in which Pubco is the surviving entity, the amount of consideration therefore will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or convertible securities, as the case may be.  The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of the principal amount of the Notes then outstanding.  If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by Pubco and the holders of the principal amount of the Notes then outstanding.  The determination of such appraiser shall be final and binding upon all parties and the fees and expenses of such appraiser shall be borne by Pubco.

 

(ii) Integrated Transactions.  In case any Option is issued in connection with the issue or sale of other securities of Pubco, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration equal to the per share par value of the Common Stock.

 

(iii) Treasury Shares.  The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of Pubco, and the disposition of any shares so owned or held will be considered an issue or sale of Common Stock.

 

(iv) Record Date.  If Pubco takes a record of the holders of Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or in convertible securities or (2) to subscribe for or purchase Common Stock, Options or convertible securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

 

(d) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock.  If Pubco at any time after the date of issuance of this Note while this Note remains issued and outstanding 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 Conversion Price or Future Price in effect immediately prior to such subdivision will be proportionately reduced.  If Pubco at any time after the date of issuance of this 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 Conversion Price or Future Price in effect immediately prior to such combination will be proportionately increased.  Any adjustment under this Section 6.01(d) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

  

9

  

 

(e) Distribution of Assets.  If Pubco shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders 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 Note while this Note remains issued and outstanding, then, in each such case the Conversion Price in effect immediately prior to the close of business on the record date fixed for the determination of holders 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 Conversion Price by a fraction of which (A) the numerator shall be the closing bid price of the Common Stock on the trading day immediately preceding such record date minus the value of the Distribution (as determined in good faith by Pubco’s Board of Directors) applicable to one share of Common Stock, and (B) the denominator shall be the closing bid price of the Common Stock on the trading day immediately preceding such record date.  Notwithstanding the foregoing, the Distribution relating to a forward split on the Company’s Common Stock in the form of a stock dividend (the “Forward Split Dividend”) to be effected prior to, and in connection with, the Merger shall in no event cause an adjustment to the Conversion Price, nor shall any similar adjustment to the capital structure of the Company effected in connection with the Merger and the PIPE affect the Conversion Price.

 

(f) Certain Events.  If any event occurs of the type contemplated by the provisions of this Section 6.01 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features but excluding the Recapitalization, as such term is defined in the Purchase Agreement), then Pubco’s Board of Directors will make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of the Note; provided, except as set forth in Section 6.01(d), that no such adjustment pursuant to this Section 6.01(f) will increase the Conversion Price as otherwise determined pursuant to this Section 6.01.

 

(g) Notices.

 

(i) Immediately upon any adjustment of the Conversion Price, Pubco will give written notice thereof to the holder of this Note, setting forth in reasonable detail, and certifying, the calculation of such adjustment.

 

(ii) Pubco will give written notice to the holder of this Note at least ten (10) days prior to the date on which Pubco closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder.

 

(h) Definitions.

 

“Other Securities” means (i) those options and warrants of Pubco issued prior to, and outstanding on, the Original Issue Date, (ii) the shares of Common Stock issuable on exercise of such options and warrants, provided such options and warrants are not amended after the Original Issue Date, and (iii) the shares of Common Stock issued in connection with the Forward Split Dividend and (iv) the shares of Common Stock issuable upon conversion of this Note.

 

(i) Nothing in this Section 6.01 shall be deemed to authorize the issuance of any securities by the Company in violation of Section 4.01

 

  

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Article VII

Section 7.01                      Notice.  Notices regarding this Note shall be sent to the parties at the following addresses, unless a party notifies the other parties, in writing, of a change of address:

 

	
If to the Company, to:

	
Placer Del Mar Ltd.

	  	

4045 Sheridan Ave., Suite 433

Miami beach, FL 33140

ATTN: Frank Terzo

Telephone:  1-561-543-8882

Facsimile:

 

	  	  
	
With a copy to:

	
Gottbetter & Partners, LLP

	  	
488 Madison Avenue, 12th Floor

	  	
New York, NY  10022

	  	
Attention: Adam S. Gottbetter, Esq.

	  	
Telephone: 1-212-400-6900

	  	  
	  	  
	
If to the Holder:

	
At the address set forth in the Purchase Agreement

Section 7.02                      Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.  If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

  

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Section 7.03                      Severability.  The invalidity of any of the provisions of this Note shall not invalidate or otherwise affect any of the other provisions of this Note, which shall remain in full force and effect.

 

Section 7.04                      Entire Agreement and Amendments.  This Note, together with the Purchase Agreement, represents the entire agreement between the parties hereto with respect to the subject matter hereof and there are no representations, warranties or commitments, except as set forth herein.  This Note may be amended only by an instrument in writing executed by the parties hereto.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

  

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IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company as executed this 10% Secured Convertible Promissory Note as of the date first written above.

 

	  	
Placer Del Mar Ltd.

	  	  
	  	  
	  	
By:                                                      

	  	
Name:                Frank Terzo

	  	
Title:                Chief Executive Officer

  

  

  

 

SCHEDULE A

EXISTING OBLIGATIONS

None.

 

  

  

  

 

SCHEDULE B

SENIOR AND PARI PASSU INDEBTEDNESS

None

 

  

  

  

 

SCHEDULE C

LIENS

None.

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