Document:

rtnb_ex104.htm

Exhibit 10.4

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS WARRANT NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE REGISTERED HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

 

 

	Warrant No.: 2016-_____  
Date of Issuance: March __, 2016

	Number of Shares:  _______
	 	 
	 	 
	 	 
	 	(subject to adjustment)

 

ROOT9B TECHNOLOGIES, INC.

A Delaware Corporation 
 

Warrant

root9B Technologies, Inc., a Delaware corporation (the “Company”), for value received, hereby certifies that _____________ (the “Initial Holder”), or its registered assigns (the Initial Holder or such registered assigns shall be referred to as the “Registered Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time on or after the Exercise Date (as hereinafter defined) and on or before the Expiration Date (as hereinafter defined), in whole or in part, _____________ shares (as adjusted from time to time pursuant to the provisions of this Warrant) of the Company’s common stock, $0.001 par value per share (“Common Stock”), at an Exercise Price equal to $1.10 per share (the “Exercise Price”).  The shares purchasable upon exercise of this Warrant are sometimes hereinafter referred to as the “Warrant Stock”.  “Exercise Date” means any date subsequent to the issuance date hereof and prior to the Expiration Date on which the Registered Holder elects by written notice to the Company to exercise this Warrant.

 

1. Exercise.

 

(a) Manner of Exercise.  This Warrant may be exercised by the Registered Holder, in whole or in part with the purchase/exercise form appended hereto as Exhibit A (the “Notice of Exercise”) duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company, or at such other office or agency as the Company may designate in writing, accompanied by payment in full of the Exercise Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise.  The Exercise Price may be paid by cash, check, or wire transfer in immediately available funds.

 

(b) Effective Time of Exercise.  Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company as provided in Section 1(a) above.  At such time, the person or persons in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 1(c) below shall be deemed to have become the holder or holders of record of the Warrant Stock represented by such certificates.

 

(c) Delivery to Holder.  As soon as practicable after the exercise of this Warrant, in whole or in part, and in any event within ten (10) calendar days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, certificates for Warrant Stock purchased hereunder which shall be transmitted by the Company’s transfer agent to the Registered Holder by (i) crediting the account of the Registered Holder’s broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the resale of the Warrant Stock by the Registered Holder or (B) the Warrant Stock is eligible for resale without volume or manner-of-sale limitations pursuant to Rule 144 of the Act, as amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule (“Rule 144”), or (ii) if the conditions specified in (i)(A) or (i)(B) are not satisfied, by physical delivery to the address specified by the Registered Holder in the Notice of Exercise.

 

  

  

  

 

(d) Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of the Registered Holder and upon surrender of this Warrant, at the time of delivery of the certificate or certificates representing the Warrant Stock, deliver to the Registered Holder a new Warrant evidencing the rights of Registered Holder to purchase the unpurchased Warrant Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. The Registered Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder.

 

(e) Limitations on Exercise. This Warrant shall not be exercisable by the Registered Holder to the extent (but only to the extent) that, following exercise, the Registered Holder or any of its Affiliates would beneficially own in excess of 9.9% (the “Maximum Percentage”) of the Outstanding Shares of Common Stock.  No prior limitation on the number of shares of Common Stock subject to this Warrant or the inability to exercise this Warrant pursuant to this Section 1(e) shall have any effect on the applicability of the provisions of this Section 1(e) with respect to any subsequent determinations of the number of shares subject to a Warrant or the exercisability hereof. For the purpose of this Section 1(e), 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.  For clarification, the foregoing calculation of beneficial ownership shall take into account all securities which give rise to beneficial ownership by the Registered Holder or its Affiliates of such Common Stock under such rules and regulations and not solely this Warrant. The provisions of this Section 1(e) shall be implemented in a manner otherwise than in strict conformity with the terms of this Section 1(e) in order to correct this Section 1(e) or any portion hereof which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this Section 1(e) shall apply to a successor holder of this Warrant.  “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.  With respect to the Registered Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager Registered Holder will be deemed to be an Affiliate of Registered Holder.  “Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or other entity of any kind and includes any successor (by merger or otherwise) of such entity.   “Outstanding Shares of Common Stock” means, as of any particular measurement time, the sum of (i) the total number of outstanding shares of Common Stock of the Company as of such time, and (ii) the total number of shares of Common Stock which Registered Holder has the right to acquire beneficial ownership of within sixty days of such measurement time (to the extent not included in (i)), including but not limited to any right to acquire shares of Common Stock through the exercise of any option, warrant or right (including this Warrant) or through the conversion of another security.  “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder.

 

(f) Cashless Exercise.

 

(i) At any time after the date hereof, the Registered Holder may, in lieu of exercising or converting this Warrant pursuant to the terms of Section 1(a), elect to exchange this Warrant pursuant to this Section 1(f) (a “Cashless Exercise”), in whole or in part (except as to a fractional share), at any time and from time to time during normal business hours on any Business Day on or prior to the Expiration Date, by (i) delivering to the Company a Notice of Exercise, duly executed by the Registered Holder, specifying the number of Warrant Shares (without giving effect to any adjustment thereto) to be issued to the Registered Holder as a result of such exchange, and (ii) surrendering this Warrant to the Company, properly endorsed by the Registered Holder (or if the Warrant has been destroyed, stolen or has otherwise been misplaced, by delivering to the Company an affidavit of loss duly executed by the Registered Holder), and the Registered Holder shall thereupon be entitled to receive the number of Warrant Shares equal to the product of (A) the number of Warrant Shares issuable upon exercise of the Warrant (or, if only a portion of such Warrant is being exercised, issuable upon the exercise of such portion), determined as provided in Section 1(a), and (B) a fraction, the numerator of which is the Market Price per share of Common Stock at the time of such exercise minus the Exercise Price in effect at the time of such exercise, and the denominator of which is the Market Price per share of Common Stock at the time of such exercise, such number of shares so issuable upon such exchange to be rounded up or down to the nearest whole number of shares of Common Stock.  “Business Day” means any day other than a Saturday, Sunday or a day on which commercial banking institutions in New York, New York are authorized or required by law or executive order to be closed.  “Market Price” of any security means the value determined in accordance with the following provisions: (i) if such security is listed on a national securities exchange registered under the Exchange Act, a price equal to the average of the closing sales prices for such security on such exchange for each day during the twenty (20) consecutive trading days immediately preceding the date in question; (ii) if not so listed, and such security is quoted in the over the counter market as reported by the OTC Bulletin Board (“OTC BB”), a price equal to the average of the closing price on the OTC BB on each day during the twenty (20) consecutive trading days immediately preceding the date in question; and (iii) if not so listed as set forth in (i) or (ii) above and such security is quoted in the over-the-counter market as reported on the “pink sheets” on OTC Pink (or any similar organization or agency succeeding to its functions of reporting prices), a price equal to the average bid price on each day during the twenty (20) consecutive trading days immediately preceding the date in question.

 

  

  

  

 

(ii) The “exchange” of this Warrant pursuant to this Section 1(f) is intended to qualify as a recapitalization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended.

 

(iii) For all purposes of this Warrant (other than this Section 1(f)), any reference herein to the “exercise” of such Warrant shall be deemed to include a reference to the exchange of such Warrant into Common Stock in accordance with the terms of this Section 1(f).

 

2. Adjustments.

 

(a) Stock Splits and Dividends.  If outstanding shares of the Company’s Common Stock shall be subdivided into a greater number of shares or a dividend in Common Stock shall be paid in respect of Common Stock, then the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced.  If outstanding shares of Common Stock shall be combined into a smaller number of shares, then the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately increased.  When any adjustment is required to be made in the Exercise Price, the number of shares of Warrant Stock purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

 

(b) Reclassification, Etc.  In case of any reclassification or change of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof (a “Transaction”), then, as a condition of the consummation of the Transaction, lawful, enforceable and adequate provision shall be made so that the Registered Holder shall be entitled to elect by written notice to the Company to receive (i) a new warrant in form and substance similar to, and in exchange for, its Warrant to purchase all or a portion of such securities or other property, or (ii) upon exercise of its Warrant at any time on or after the consummation of the Transaction, in lieu of the shares of Common Stock issuable upon such exercise prior to such consummation, the securities or other property (including cash) to which the Registered Holder would have been entitled upon consummation of the Transaction if the Registered Holder had exercised its Warrant(s) immediately prior thereto (subject to adjustments from and after the consummation date as nearly equivalent as possible to the adjustments provided for in this Section 2). The Company will not affect any Transaction unless prior to the consummation thereof each corporation or other entity (other than the Company) which may be required to deliver any new warrant, securities or other property as provided herein shall assume, by written instrument delivered to such Registered Holder, the obligation to deliver to the Registered Holder such new warrant, securities or other property as in accordance with the foregoing provisions the Registered Holder may be entitled to receive. The foregoing provisions of this Section 2(b) shall similarly apply to successive Transactions.

 

  

  

  

 

(c)      Adjustment Certificate.  When any adjustment is required to be made in the Warrant Stock or the Exercise Price pursuant to this Section 2, the Company shall promptly mail to the Registered Holder a certificate setting forth (i) a brief statement of the facts requiring such adjustment, (ii) the Exercise Price after such adjustment and (iii) the kind and amount of stock or other securities or property into which this Warrant shall be exercisable after such adjustment.

 

3. Transfers.

 

(a) Unregistered Security

 

1. .  Each Registered Holder acknowledges that this Warrant and the Warrant Stock have not been registered under the Securities Act of 1933, as amended (the “Act”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an effective registration statement under the Act as to this Warrant or such Warrant Stock and registration or qualification of this Warrant or such Warrant Stock under any applicable U.S. federal or state securities law then in effect or (ii) an opinion of counsel, reasonably satisfactory to the Company, that such registration or qualification is not required.  Each certificate or other instrument for Warrant Stock issued upon the exercise of this Warrant shall bear a legend substantially to the foregoing effect.

(b) Transferability.  Subject to the provisions of Section 3(a) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant with a properly executed assignment (in the form of Exhibit B hereto) at the principal office of the Company. The Company shall, upon receipt of a transfer notice and appropriate documentation, register any transfer on the Company’s warrant register; provided, however, that the Company may require, as a condition to such transfer, an opinion reasonably satisfactory to the Company that said transfer does not require registration pursuant to one or more exemptions provided under the Act.

 

(c) Warrant Register.  The Company will maintain a register containing the names and addresses of the Registered Holders of this Warrant.  Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if this Warrant is properly assigned in blank, the Company may (but shall not be required to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.  Any Registered Holder may change such Registered Holder’s address as shown on the warrant register by written notice to the Company requesting such change.

 

4.           No Impairment.  The Company will not, by amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. Notwithstanding any other provision of this Agreement to the contrary (including by way of implication), the Company (a) will not increase the par value of any shares of Common Stock receivable on the exercise of any Warrant above the amount payable therefor on such exercise and (b) will take all such action as may be necessary or appropriate so that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock on the exercise of any Warrant. The Company covenants and agrees that it shall not, without the prior written consent of the Registered Holder, enter into or agree to become subject to any term, condition, provision or agreement that would restrict in any material way the performance of the Company’s obligations under this Agreement. The Company represents to each Holder that the Company is not subject to or bound by any such term, condition, provision or agreement as of the date hereof. The Company further covenants and agrees that it shall not, without the prior written consent of the Registered Holder, which shall not be unreasonably withheld, conditioned or delayed, take any action or agree to take any action that would cause or result in or could reasonably be expected to cause or result in any Qualified Purchaser (as defined in that certain Amended and Restated Securities Purchase Agreement of even date herewith, pursuant to which this Warrant was issued) beneficially owning more than the Maximum Percentage of the Outstanding Shares of Common Stock. As used herein the term “Outstanding Shares of Common Stock” shall mean as of any particular measurement time, the sum of (i) the total number of outstanding shares of Common Stock as of such time, and (ii) the total number of shares of Common Stock which the Registered Holder has the right to acquire beneficial ownership of within sixty days of such measurement time (to the extent not included in (i)), including but not limited to any right to acquire shares of Common Stock through the exercise or conversion of any securities of the Company or any subsidiary of the Company which 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 exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock).

 

  

  

  

 

5.           Termination.  This Warrant (and the right to purchase securities upon exercise hereof) shall terminate five (5) years from the date of issuance of this Warrant (the “Expiration Date”).

 

6.           Notices of Certain Transactions.  In case:

 

(a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

 

(b) of any reclassification of the capital stock of the Company, or

 

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company ((a), (b) and (c) of this Section 6 being referred to herein as a “Liquidation Event”), then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reclassification, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon such reclassification, dissolution, liquidation or winding-up) are to be determined.  Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice.  Failure to so notify a Registered Holder shall not invalidate any such action.

 

7.           Reservation of Stock.  The Company will at all times reserve and keep available out of its authorized but unissued stock, solely for the issuance and delivery upon the exercise of this Warrant and other similar Warrants, and free of preemptive rights, such number of its duly authorized shares of Common Stock as from time to time shall be issuable upon the exercise of this Warrant and other similar Warrants. All of the shares of Common Stock issuable upon exercise of this Warrant and other similar Warrants, when issued and delivered in accordance with the terms hereof and thereof, will be duly authorized, validly issued, fully paid and non-assessable, subject to no lien or other encumbrance other than restrictions on transfer arising under applicable securities laws and restrictions imposed by Section 3 hereof.

 

8.           Exchange of Warrants.  Upon the surrender by the Registered Holder of any Warrant or Warrants, properly endorsed, to the Company at the principal office of the Company, the Company will, subject to the provisions of Section 3 hereof, issue and deliver to or upon the order of such Registered Holder, at the Company’s expense, a new Warrant or Warrants of like tenor, in the name of such Registered Holder or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered.

 

9.           Replacement of Warrants.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

  

  

  

 

10.           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, electronic mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, electronic mail or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, if sent by electronic mail with confirmed receipt, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.

If to the Company:               root9B Technologies, Inc.

4521 Sharon Road #300

Charlotte, NC  28211-3627

                               Attn:  Joseph J. Grano, Jr., Chief Executive Officer

	
If to the Registered Holder:

	
At the address provided by the Registered Holder.

11.           No Rights as Stockholder.  Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company, and this Warrant shall not impose on the Registered Holder any obligation to purchase any securities or impose any liability on such Registered Holder as a stockholder whether such obligation or liabilities are asserted by the Company or creditors of the Company.

 

12.           Representations of Registered Holder.  The Registered Holder hereby represents and acknowledges to the Company that:

 

(d) It understands that this Warrant and the Warrant Stock will be “restricted securities” as such term is used in the rules and regulations under the Act and that such securities have not been and will not be registered under the Act or any state securities law, and that such securities must be held indefinitely unless registration is effected or transfer can be made pursuant to appropriate exemptions;

 

(e) the Registered Holder has read, and fully understands, the terms of this Warrant set forth on its face and the attachments hereto, including the restrictions on transfer contained herein;

 

(f) the Registered Holder is purchasing for investment for its own account and not with a view to or for sale in connection with any distribution of this Warrant and the Warrant Stock and it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; provided that nothing contained herein will prevent the Registered Holder from transferring such securities in compliance with the terms of this Warrant and the applicable federal and state securities laws; and

 

(g) the Company may affix the following legend (in addition to any other legend(s), if any, required by applicable state corporate and/or securities laws) to certificates for shares issued upon exercise of this Warrant:

 

“These securities have not been registered under the Securities Act of 1933, as amended.  They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration statement in effect with respect to the securities under such Act or an opinion of counsel satisfactory to the Company that such registration is not required or unless sold pursuant to Rule 144 of such Act.”

 

  

  

  

 

13.           No Fractional Shares.  No fractional shares will be issued in connection with any exercise hereunder.  In lieu of any fractional shares which would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one such share on the date of exercise, as determined in good faith by the Company’s Board of Directors.

 

14.           Securities Law Reporting Requirements. The Company covenants and agrees that it will comply with the reporting requirements of Sections 13 and 15(d) of the Exchange Act and will comply with all other public information reporting requirements of the Securities and Exchange Commission (including Rule 144 promulgated under the Securities Act) from time to time in effect and applicable to the Company and relating to the availability of an exemption from the Securities Act for the sale of restricted securities.

 

15.           Amendment or Waiver.  Any term of this Warrant may be amended or waived upon written consent of the Company and the Registered Holder.

 

16.           Headings.  The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

 

17.           Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement shall be commenced exclusively in courts of the State of Delaware (the “Delaware Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction of any such Delaware Court, or that such proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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 Agreement 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 AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

 [Remainder of Page Intentionally Left Blank]

 

  

  

  

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and delivered by its authorized officer as of the date first above written.

 

	 	 
ROOT9B TECHNOLOGIES, INC. , a Delaware corporation

	 
	 	 	 	 
	
Date

	
Signed:

	 	 
	 	By:	 	 
	 	Title:	Title 	 
	 	 	 	 

 

Company Address:              root9B Technologies, Inc.

4521 Sharon Road #300

Charlotte, NC  28211-3627

                               Attn:  Joseph J. Grano, Jr., Chief Executive Officer

   

[SIGNATURE PAGE TO ROOT9B TECHNOLOGIES COMMON STOCK WARRANT]

 

  

  

  

 

EXHIBIT A

 

PURCHASE/EXERCISE FORM

 

To:           ROOT9B TECHNOLOGIES, INC. Dated:_________________

 

The undersigned holder, pursuant to the provisions set forth in the attached Warrant No. ___, hereby exercises the right to purchase _________________ shares of Common Stock covered by such 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 undersigned holder intends that payment of the Exercise Price shall be made as:

 

	
  

	
____________

	
a “Cash Exercise” with respect to _________________ shares of Warrant Stock; and

 

	
  

	
____________

	
a “Cashless Exercise” with respect to _________________ shares of Warrant Stock

 

2.           Payment of Exercise Price.  The Registered Holder shall pay the aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

The undersigned acknowledges that it has reviewed the representations and warranties contained in Section 12 of the Warrant and by its signature below hereby makes such representations and warranties to the Company.

 

	 	
Signature:

	 
	 	
Name (print):

	 
	 	
Title (if applic.)

	 
	 	
Company (if applic.):

	 

  

 

  

  

  

 

EXHIBIT B

 

ASSIGNMENT FORM

 

FOR VALUE RECEIVED, _________________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant No. ___ with respect to the number of shares of Common Stock covered thereby set forth below, to:

 

	

Name of Assignee

	

Address/Fax Number

	

No. of Shares

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

 

	Dated:	 	 	
Signature:

	 
	 	 	 
	 	 	 
	 	
Witness:ex10-1.htm

Exhibit 10.1

 

 

 

INVESTORS AGREEMENT

 

This INVESTORS AGREEMENT is made and entered into as of March 11, 2016 (the “Agreement”) by and among LRAD Corporation, a Delaware corporation (the “Company”), and each of the other parties listed on the signature page hereto (each, an “Investor” and collectively, the “Investors”). The Company and the Investors are referred to herein as the “Parties.”

 

WHEREAS, the Investors beneficially own the number of shares of the Company’s common stock, par value $0.00001 per share (the “Common Stock”) listed on Exhibit A hereto;

 

WHEREAS, on January 14, 2016, Iroquois Master Fund, Ltd. (“Iroquois”), on behalf of the Investors, delivered a letter to the Company expressing an intention to nominate director candidates (the “Nomination Letter”) for election to the Company’s Board of Directors (the “Board”) at the Company’s 2016 annual meeting of stockholders (including any adjournment thereof, the “2016 Annual Meeting”); and

 

WHEREAS, the Company and the Investors have reached an agreement with respect to certain matters related to the 2016 Annual Meeting, including the Nomination Letter, and certain other matters, as provided in this Agreement;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

 

Section 1. Board of Directors Matters.

 

(a) The Investors and the Company hereby acknowledge and agree that:

 

(i) Immediately after execution of this Agreement, the Board will cause the size of the Board to be increased from five to seven directors and will appoint Scott L. Anchin and Daniel H. McCollum (the “Investor Directors”) to fill such newly created vacancies.

 

(ii) The Nominating and Corporate Governance Committee (or a duly constituted subcommittee thereof) (the “Nominating Committee”) of the Board will recommend for nomination and the Board will nominate the Investor Directors and General John G. Coburn, Thomas R. Brown, Laura M. Clague and Richard H. Osgood III (collectively, the “Continuing Directors” and, together with the Investor Directors, the “2016 Nominees”) for election at the 2016 Annual Meeting and will recommend a vote for the 2016 Nominees and solicit proxies from the Company’s stockholders for the election of the 2016 Nominees at the 2016 Annual Meeting. The Company agrees that it shall hold the 2016 Annual Meeting no later than July 31, 2016. 

 

(iii) As a condition to the Investor Directors’ appointment to the Board and nomination as a director of the Company at the 2016 Annual Meeting, the Investors agree to provide to the Company information required to be or customarily disclosed for directors, candidates for directors and their affiliates and representatives in a proxy statement or other filings under applicable law or stock exchange rules or listing standards, information in connection with assessing eligibility, independence and other criteria applicable to directors or satisfying compliance and legal obligations, and such other information as reasonably requested by the Company from time to time with respect to the Investors and the Investor Directors, in form and substance substantially similar to the questionnaires that have been provided to the Company’s current directors.

 

(iv) Immediately following the execution of this Agreement, the Board and all applicable committees of the Board shall take all necessary actions to appoint at least one of the Investor Directors as a member of each committee of the Board. The Company further agrees that at least one of the Investor Directors will be appointed to any new committee of the Board that may be established during the Standstill Period (as defined below) provided that at least one Investor Director is serving on the Board at such time and is qualified to serve on any such newly established committee of the Board.

 

 

 

 

  

(v) To the extent an Investor Director resigns for any reason other than pursuant to Section 4 or is otherwise unable to serve as a director or is removed as a director by the stockholders of the Company, in each case, during the Standstill Period, the Investors shall be entitled to designate, for consideration by the Nominating Committee as a replacement for such Investor Director, an individual who (A) qualifies as “independent” under the Nasdaq corporate governance standards, (B) has relevant business and financial experience, and (C) is qualified to serve as a director under the Delaware General Corporation Law (the “DGCL”). The Nominating Committee, consistent with its fiduciary duties, shall consider such candidate within ten (10) business days after a completed customary director and officer questionnaire has been received by the Nominating Committee, and the Board shall appoint such candidate if approved by the Nominating Committee (whose approval and appointment shall not be unreasonably withheld) within five (5) business days (any such replacement director appointed in accordance with the provisions of this Section 1(a)(iv) shall be referred to as an “Investor Director” for the purposes of this Agreement). In the event the Nominating Committee shall decline to recommend any candidate designated by the Investors, the Investors may propose one or more replacement designees, subject to the above criteria.

 

(vi) During the period commencing with the date of the 2016 Annual Meeting through the expiration or termination of the Standstill Period (as defined below), the Board and all applicable committees of the Board shall take all necessary actions (including with respect to nominations for election at the 2016 Annual Meeting) so that the size of the Board is no more than six (6) directors, unless the Investors consent in writing to enlarging the Board.

 

(b) Upon execution of this Agreement, the Investors hereby irrevocably withdraw the Nomination Letter. Upon execution of this Agreement, the Company will promptly pay to the Investors their out-of-pocket legal and advisory fees in connection with the Nomination Letter and this Agreement, invoices for which have been previously provided to the Company. For the avoidance of doubt, such legal and advisory fees shall not exceed $130,000.

 

Section 2. Voting Agreement.

 

(a) At the 2016 Annual Meeting, the Investors agree to appear in person or by proxy and vote all shares of Common Stock beneficially owned by each Investor and its Affiliates in favor of (i) the election of the 2016 Nominees and (ii) the following other matters recommended for stockholder approval by the Board: (A) ratification of the appointment of the Company’s independent registered public accounting firm and (B) an advisory vote on the compensation of the Company’s named executive officers.

 

(b) At any subsequent annual or special meeting of stockholders of the Company (or adjournments thereof) during the Standstill Period (as defined below), the Investors agree to vote all shares of Common Stock beneficially owned by each Investor and its Affiliates in favor of the election to the Board of those director nominees nominated for election by the Nominating Committee or the Board and against the removal of any directors whose removal is not recommended by the Board.

 

(c) Each Investor agrees to, within ten (10) business days after receipt, execute and deliver to the Company, or cause to be executed and delivered to the Company, the proxy card sent to the Investors by the Company in connection with the 2016 Annual Meeting and any subsequent annual or special meeting of stockholders of the Company (or adjournments thereof) during the Standstill Period (and any other legal proxies delivered to the Investors required to vote any shares held in “street name”) directing that the shares of Common Stock beneficially owned by such Investor, as of the applicable record date, be voted in accordance with Section 2(a) and Section 2(b).

 

 

 

 

  

Section 3. Standstill.

 

(a) Each Investor agrees that, from the date of this Agreement until the expiration of the Standstill Period, neither it nor any of its Affiliates or Associates will, and it will cause each of its Affiliates and Associates not to, directly or indirectly, in any manner, acting alone or in concert with others:

 

(i) submit any stockholder proposal (pursuant to Rule 14a-8 promulgated by the Securities and Exchange Commission (the “SEC”) under the Exchange Act or otherwise) or any notice of nomination or other business for consideration, or nominate any candidate for election to the Board (including by way of Rule 14a-11 of Regulation 14A), other than as expressly permitted by this Agreement;

 

(ii) engage in, directly or indirectly, any “solicitation” (as defined in Rule 14a-1 of Regulation 14A) of proxies (or written consents) or otherwise become a “participant in a solicitation” (as such term is defined in Instruction 3 of Schedule 14A of Regulation 14A under the Exchange Act) in opposition to the recommendation or proposal of the Board, or recommend or request or induce or attempt to induce any other person to take any such actions, or seek to advise, encourage or influence any other person with respect to the voting of the Common Stock or grant a proxy with respect to the voting of the Common Stock or other voting securities to any person other than to the Board or persons appointed as proxies by the Board;

 

(iii) seek to call, or to request the call of, a special meeting of the Company’s stockholders, or make a request for a list of the Company’s stockholders or for any books and records of the Company;

 

(iv) vote for any nominee or nominees for election to the Board, other than those nominated or supported by the Board;

 

(v) except as specifically provided in Section 1 and Section 2 of this Agreement, seek to place a representative or other Affiliate, Associate or nominee on the Board or seek the removal of any member of the Board or a change in the size or composition of the Board;

 

(vi) disclose publicly, or privately in a manner that could reasonably be expected to become public, any intention, plan or arrangement inconsistent with the foregoing;

 

(vii) take any action challenging the validity or enforceability of any provisions of this Section 3(a);

 

(viii) publicly request that the Company amend or waive any provision of this Section 3(a); or

 

(ix) enter into any agreement, arrangement or understanding concerning any of the foregoing (other than this Agreement) or encourage or solicit any person to undertake any of the foregoing activities;

 

provided, however, that nothing in this Section 3(a) or elsewhere in this Agreement shall prohibit (A) any Investor from privately making any statement or expressing or disclosing such Investor’s views in private to the Chief Executive Officer, the Chief Financial Officer or another other officer or director of the Company; or (B) any Investor, Affiliate or Associate from voting in such manner as it deems appropriate on any matter unrelated to the election of directors of the Company and the other matters referenced in Section 2(a).

 

(b) As used in this Agreement:

 

(i) the term “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified with respect to the specific action at issue hereunder; the term “Associate” means any corporation or organization controlled by the person specified, any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as a trustee or in a similar fiduciary capacity, and any relative or spouse of such person, or any relative of such spouse, who has the same home as such person, in each case, with respect to the specific action at issue hereunder; the term “control” shall have the meaning set forth in Rule 12b-2 promulgated by the SEC under the Exchange Act; the terms “beneficial owner” and “beneficial ownership” shall have the same meanings as set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act; and the terms “person” or “persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature; and

 

 

 

 

  

(ii) the term “Standstill Period” shall mean the period commencing upon the date of this Agreement, and ending on the earlier of (A) ten (10) business days prior to the deadline for submission of stockholder nominations for the Company’s 2017 annual meeting of stockholders (the “2017 Annual Meeting”) pursuant to the Company’s Restated Bylaws (“2017 Nomination Deadline”) and (B) such date, if any, as the Company has breached in any material respect any of its representations, warranties, commitments or obligations set forth in this Agreement and such breach has not been cured within fifteen (15) days following written notice of such breach; provided, however, that if the Company notifies the Investors in writing at least fifteen (15) business days prior to the 2017 Nomination Deadline of the Company’s intention to nominate and recommend the election of each of the Investor Directors (or their replacements, as applicable) as nominees at the 2017 Annual Meeting on the Company’s slate of director candidates, the Standstill Period shall mean the period commencing on the date of this Agreement and ending on the earlier of (A) ten (10) business days prior to the deadline for submission of stockholder nominations for the Company’s 2018 annual meeting of stockholders pursuant to the Company’s Restated Bylaws and (B) such date, if any, as the Company has breached in any material respect any of its representations, warranties, commitments or obligations set forth in this Agreement and such breach has not been cured within fifteen (15) days following written notice of such breach

 

Section 4. Resignation Letter. As a condition to commencement of a term on the Board (or nomination therefor), each Investor Director shall provide to the Company an irrevocable letter of resignation which shall become effective fifteen (15) days after written notice of a material breach by any Investor of this Agreement is provided to the breaching Investor by the Company (unless such breach is cured within such fifteen (15) day period); provided, that if such alleged breaching Investor disputes such breach, the resignation of such Investor Director shall not become effective until (i) the Investor agrees not to dispute such breach in writing or (ii) a court of competent jurisdiction in a final judgment on the merits (whether or not subject to appeal) has confirmed or determined the existence of such breach.

 

Section 5. Representations and Warranties of the Company. The Company represents and warrants to the Investors that (a) the Company has the corporate power and authority to execute the Agreement and to bind it thereto, (b) this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid and binding obligation and agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles and (c) the execution, delivery and performance of this Agreement by the Company does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to it, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, or any material agreement, contract, commitment, understanding or arrangement to which the Company is a party or by which it is bound.

 

Section 6. Representations and Warranties of the Investors. Each Investor, on behalf of itself, represents and warrants to the Company that (a) as of the date hereof, such Investor beneficially owns only the number of shares of Common Stock as described opposite its name on Exhibit A and Exhibit A includes all Affiliates of any Investors that own any securities of the Company beneficially or of record, (b) this Agreement has been duly and validly authorized, executed and delivered by such Investor, and constitutes a valid and binding obligation and agreement of such Investor, enforceable against such Investor in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles, (c) such Investor has the authority to execute the Agreement, and to bind such Investor to the terms hereof and (d) the execution, delivery and performance of this Agreement by such Investor does not and will not violate or conflict with (i) any law, rule, regulation, order, judgment or decree applicable to it, or (ii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both could become a default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, agreement, contract, commitment, understanding or arrangement to which such member is a party or by which it is bound.

 

 

 

 

  

Section 7. Mutual Non-Disparagement.

 

(a) Each Investor agrees that, during the Standstill Period, neither it nor any of its Affiliates or Associates will, and it will cause each of its Affiliates and Associates not to, directly or indirectly, in any capacity or manner, make, express, transmit speak, write, verbalize or otherwise communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing, electronically transferred or otherwise, that might reasonably be construed to be derogatory toward, the Company or any of its directors, officers, Affiliates, subsidiaries, employees, agents or representatives (collectively, the “Company Representatives”), or that reveals, discloses, incorporates, is based upon, discusses, includes or otherwise involves any confidential or proprietary information of the Company or its subsidiaries or Affiliates, or derogatorily to malign, harm, disparage, defame or damage the reputation or good name of the Company, its business or any of the Company Representatives.

 

(b) The Company hereby agrees that, during the Standstill Period, neither it nor any of its Affiliates will, and it will cause each of its Affiliates not to, directly or indirectly, in any capacity or manner, make, express, transmit, speak, write, verbalize or otherwise communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether verbal, in writing, electronically transferred or otherwise, that might reasonably be construed to be derogatory toward, any Investor or any of its agents or representatives (collectively, the “Investor Representatives”), or that reveals, discloses, incorporates, is based upon, discusses, includes or otherwise involves any confidential or proprietary information of any Investor or its subsidiaries or Affiliates, or derogatively to malign, harm, disparage, defame or damage the reputation or good name of any Investor or Investor Representative.

 

(c) Notwithstanding the foregoing, nothing in this Section 7 or elsewhere in this Agreement shall prohibit any Party from making any statement or disclosure required under the federal securities laws or other applicable laws; provided , that such Party must provide written notice to the other Parties at least two (2) business days prior to making any such statement or disclosure required under the federal securities laws or other applicable laws that would otherwise be prohibited by the provisions of this Section 7, and reasonably consider any comments of such other Parties.

 

Section 8. Public Announcements. Promptly following the execution of this Agreement, the Company and the Investors shall jointly issue a mutually agreeable press release (the “Mutual Press Release”) announcing the terms of this Agreement, substantially in the form attached hereto as Exhibit B. Prior to the issuance of the Mutual Press Release, neither the Company nor the Investors shall issue any press release or public announcement regarding this Agreement or take any action that would require public disclosure thereof without the prior written consent of the other Party. No Party or any of its Affiliates shall make any public statement (including, without limitation, in any filing required under Regulation 13D under the Exchange Act) concerning the subject matter of this Agreement inconsistent with the Mutual Press Release.

 

 

 

 

  

Section 9. Notice. Any notices, consents, determinations, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally; (b) upon receipt, when sent by electronic transmission (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (c) one (1) business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

	
If to the Company, addressed to:

LRAD Corporation
16990 Goldentop Rd., Ste. A
San Diego, California 92127
Attention: Katherine H. McDermott
Tel: (858) 676-1112
Fax: (858) 676-1080
Email: KathyMcDermott@lradx.com

with a copy to (for information purposes only):
Durham Jones & Pinegar, P.C.
192 E. 200 N., Third Floor
St. George, UT 84770
Attention: Joshua E. Little, Esq.
Tel: (435) 674-0400
Fax: (435) 628-1610
Email: jlittle@djplaw.com
	
If to the Investors, addressed to:

Iroquois Capital Management LLC
641 Lexington Avenue, 26th Floor
New York, New York 10022
Attention: Joshua Silverman
Tel: (212) 974-3070
Fax: (212) 207-3452
Email: jsilverman@icfund.com

with a copy to (for information purposes only):

Olshan Frome Wolosky LLP 

Park Avenue Tower 

65 East 55th Street 

New York, New York 10022 

Attention: Andrew Freedman, Esq. 

Tel: (212) 451-2250 

Fax: (212) 451-2222 

Email: afreedman@olshanlaw.com 

 

Section 10. Specific Performance. Each of the Investors, on the one hand, and the Company, on the other hand, acknowledges and agrees that irreparable injury to the other Party hereto may occur in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached and that such injury would not be adequately compensable in monetary damages. It is accordingly agreed that the Investors or any Investor, on the one hand, and the Company, on the other hand (the “Moving Party”), shall each be entitled to specific enforcement of, and injunctive or other equitable relief to prevent any violation of, the terms hereof, and the other party hereto will not take action, directly or indirectly, in opposition to the Moving Party seeking such relief on the grounds that any other remedy or relief is available.

 

Section 11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the Law of the State of Delaware, without regard to conflict of law principles thereof.

 

Section 12. Exclusive Jurisdiction. Each Party to this Agreement (i) irrevocably and unconditionally submits to the personal jurisdiction of the state courts of the State of Delaware and the federal courts of the United States of America located in the State of Delaware, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that any actions or proceedings arising in connection with this Agreement or the transactions contemplated by this Agreement shall be brought, tried and determined only in the Court of Chancery of the State of Delaware (or, only if said Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), (iv) waives any claim of improper venue or any claim that those courts are an inconvenient forum and (v) agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereunder in any court other than as specified in clause (iii) of this Section 12. The Parties to this Agreement agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 10 or in such other manner as may be permitted by applicable Law, shall be valid and sufficient service thereof.

 

Section 13. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED AND UNDERSTANDS THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.

 

 

 

 

  

Section 14. Entire Agreement. This Agreement constitute the full and entire understanding and agreement among the Parties with regard to the subject matter hereof, and supersedes all prior agreements with respect to the subject matter hereof.

 

Section 15. Receipt of Adequate Information; No Reliance; Representation by Counsel. Each Party acknowledges that it has received adequate information to enter into this Agreement, that is has not relied on any promise, representation or warranty, express or implied not contained in this Agreement and that it has been represented by counsel in connection with this Agreement. Accordingly, any rule of law or any legal decision that would provide any party with a defense to the enforcement of the terms of this Agreement against such party shall have no application and is expressly waived. The provisions of the Agreement shall be interpreted in a reasonable manner to effect the intent of the Parties.

 

Section 16. Amendment. This Agreement may be modified, amended or otherwise changed only in a writing signed by all of the Parties.

 

Section 17. Successors and Assigns. This Agreement shall bind the successors and permitted assigns of the Parties, and inure to the benefit of any successor or permitted assign of any of the parties; provided, however, that no party may assign this Agreement without the prior written consent of the other Parties.

 

Section 18. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by all of the other Parties. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.

 

Section 19. Attorneys’ Fees. In the event any Party shall fail to perform any of its material obligations under this Agreement and another Party hereto shall bring suit, and establish, in a court of proper jurisdiction under Section 12 (after all appeals) that the actions of such alleged breaching Party giving rise to such breach were undertaken with the actual intent and actual purpose of materially breaching this Agreement, then all reasonable third party out-of-pocket fees and expenses, including, without limitation, reasonable attorneys’ fees and expenses, that may be incurred by the prevailing Party in enforcing this Agreement as relates to such material breach shall be paid by the materially breaching Party; provided that prior to initiating such suit, the claiming Party shall give the other Parties written notice of the claimed breach and ten (10) days from receipt of such notice to cure any claimed breach.

 

[Signature page follows]

 

 

 

 

  

IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered this Agreement as of the date first above written.

 

	
LRAD CORPORATION
	
INVESTORS:
	
 

	 	IROQUOIS CAPITAL MANAGEMENT L.L.C.	 
	
 
	
 
	
 
	
 

	
By: /s/ John G. Coburn                                            
	
By: 
	
/s/ Joshua Silverman 
	
 

	
Name: John G. Coburn                                             
	
Name:
	
Joshua Silverman
	
 

	
Title: Chairman                                                          
	
Title:
	
Authorized Signatory
	
 

	 	 	 	 
	 	IROQUOIS MASTER FUND LTD	 
	 	 	 	 
	 	By:	/s/ Joshua Silverman	 
	 	Name:	Joshua Silverman	 
	 	Title:	Authorized Signatory	 
	 	 	 	 
	 	/s/ Joshua Silverman 	 
	 	JOSHUA SILVERMAN	 
	 	 	 	 
	 	/s/ Richard Abbe	 
	 	RICHARD ABBE	 
	 	 	 
	 	AMERICAN CAPITAL MANAGEMENT, LLC	 
	 	 	 	 
	 	By:	/s/ Kim Page 	 
	 	Name:	Kim Page	 
	 	Title:	Manager 	 
	 	 	 	 
	 	TALIA ABBE IRREVOCABLE TRUST	 
	 	 	 	 
	 	By:	/s/ Richard Abbe 	 
	 	Name:	Richard Abbe	 
	 	Title:	Trustee 	 
	 	 	 	 
	 	BENNETT ABBE IRREVOCABLE TRUST	 
	 	 	 	 
	 	By:	/s/ Richard Abbe	 
	 	Name:	Richard Abbe	 
	 	Title:	Trustee 	 
	 	 	 	 
	 	SAMANTHA ABBE IRREVOCABLE TRUST	 
	 	 	 	 
	 	By:	/s/ Richard Abbe	 
	 	Name:	Richard Abbe	 
	 	Title:	Trustee	 
	 	 	 	 
	 	TALIA ABBE IRREVOCABLE TRUST	 
	 	 	 	 
	 	By:	/s/ Leo Abbe 	 
	 	Name:	Leo Abbe	 
	 	Title:	Trustee 	 

     

 

 

 

 

EXHIBIT A

 

 

 

	
Investor
	
Shares of Common  Stock
Beneficially Owned*

	  	  
	
Iroquois Capital Management L.L.C.
	
 

	 	1,281,337	 
	
Richard Abbe 
	
139,257 
	
*

	Joshua Silverman	16,644	 
	American Capital Management	173,242	 
	Talia Abbe Irrevocable Trust	46,419	 
	Bennett Abbe Irrevocable Trust	46,419	 
	Samantha Abbe Irrevocable Trust	46,419	 
	Merav Abbe Irrevocable Trust	100,742	 
	 	 	 
	Total: 	1,711,222	 

 

 

	
*
	
Represents beneficial ownership held through the Samantha Abbe Irrevocable Trust, Talia Abbe Irrevocable Trust and Bennett Abbe Irrevocable Trust

 

 

 

 

 

EXHIBIT B

 

Mutual Press Release

 

  

 

LRAD® CORPORATION ANNOUNCES SETTLEMENT AGREEMENT

WITH IROQUOIS MASTER FUND LTD. AND 

SCHEDULES ANNUAL MEETING OF STOCKHOLDERS

 

CEO Tom Brown to Resign from Company

 

SAN DIEGO, CA – March 14, 2016 - LRAD Corporation (NASDAQ: LRAD), the world’s leading provider of acoustic hailing devices and advanced mass notification systems, today announced it has reached an agreement with Iroquois Master Fund Ltd. and certain of its affiliates (collectively “Iroquois”), with regard to the 2016 Annual Meeting of Stockholders. Iroquois had previously nominated two new independent nominees to LRAD’s Board of Directors (the “Board”). In the Investors Agreement, it was agreed that Iroquois’ two nominees, Scott L. Anchin and Daniel H. McCollum, will be appointed to the Board immediately and will be nominated for election at the 2016 Annual Meeting. As part of the agreement, Iroquois will vote all of its shares in favor of the 2016 nominees at the Annual Meeting. 

 

“We believe this agreement is in the best interests of the Company and our stockholders,” stated General John G. Coburn, Chairman of the Company’s Board of Directors. “We look forward to working together with our new Board members to increase long term stockholder value.” 

 

“We are pleased to have worked constructively with LRAD and commend LRAD’s Board for its thoughtful engagement over the past couple of months,” stated Josh Silverman, co-founder and managing member of Iroquois Capital Management, LLC. “We are excited that we have been able to attract two highly qualified directors of Scott and Dan’s caliber to a company of LRAD’s size. It is clear LRAD has excellent prospects and we believe that this newly composed Board will help maximize the Company’s potential and enhance stockholder value.”

 

Scott L. Anchin is a restructuring professional with more than 19 years of leadership experience spanning a variety of industries. Until recently, Mr. Anchin worked for Alvarez & Marsal North America, LLC (“A&M”), a global professional services firm specializing in turnaround and interim management and performance improvement. Mr. Anchin started his career in public accounting with Anchin, Block & Anchin LLP, where he audited financial statements for manufacturing, real estate, retail and consumer products companies. Mr. Anchin has a Bachelor of Science in Accounting from the Wharton School of Business at the University of Pennsylvania and an MBA with a concentration in Management from Columbia Business School. He is also a non-active Certified Public Accountant (CPA). 

 

 

 

 

  

Daniel H. McCollum is a Managing Director in the Investment Office of Brown University in Providence, RI, a position he has held since 2013.  The Investment Office of Brown University is responsible for managing the University’s $3+ billion endowment.  From 2008 through 2013, Mr. McCollum was a Managing Director at Narragansett Asset Management, LLC.  Mr. McCollum has a B.A. in Economics from the University of California at Berkeley and an M.B.A. from the Columbia Business School. 

 

The Company also announced that Tom Brown, the Company’s President and Chief Executive Officer, is resigning from the Company effective June 30, 2016. The Company’s Board of Directors has initiated a replacement search.

 

Mr. Brown joined the Company as a member of the Board in March 2006 and became President and Chief Executive Officer in August 2006. Brown guided the development and expansion of the Company’s successful LRAD-X product line and established the LRAD brand around the world by building U.S. and international distribution networks, resulting in LRAD systems being utilized in over 70 countries and in more than 200 U.S. cities, counties and states. Brown personally brought in the Company’s largest order to date ($17.6 million) and his efforts resulted in the recent modification of the Company’s current U.S. Navy contract that provides a vehicle for the U.S. Army to purchase LRAD systems and accessories under the modified contract. 

 

Mr. Brown increased the Company’s business potential by entering the large and growing mass notification market with a line of advanced life safety systems that have recorded over 70% in annual revenue growth the last two fiscal years. By building a solid financial structure, Brown has grown the Company organically during his tenure, resulting in six consecutive years of profitability and seven consecutive years of positive cash flow. 

 

“Under Tom’s leadership, the Company created the acoustic hailing device market and achieved global recognition of its products and the LRAD brand,” stated General Coburn. “The Board thanks Tom for his years of service and many contributions, including the Company’s good financial health and positioning it for further growth and success.”

 

The Company also announced that its annual meeting of stockholders has been scheduled for May 17, 2016 at its corporate offices. Stockholders of record as of March 23, 2016 will be eligible to vote for the proposed slate of directors and other proposals for consideration that will be included in the Company’s proxy statement scheduled for filing with the Securities and Exchange Commission (SEC).

 

About LRAD Corporation

 

Using advanced technology and superior voice intelligibility, LRAD Corporation’s proprietary Long Range Acoustic Devices® and revolutionary ONE VOICE® mass notification systems safely hail and warn, inform and direct, prevent misunderstandings, determine intent, establish large safety zones, resolve uncertain situations, and save lives. LRAD systems are in service in more than 70 countries around the world in diverse applications including mass notification and public address, fixed and mobile defense deployments, homeland, border, critical infrastructure, maritime, oil & gas, and port security, public safety, law enforcement and emergency responder communications, asset protection, and wildlife control and preservation. For more information, please visit www.lradx.com. 

 

 

 

 

 

Forward Looking Statements 

 

Except for historical information contained herein, the matters discussed are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, the stage of product and market development as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements. These risks and uncertainties are identified and discussed in our filings with the Securities and Exchange Commission. These forward-looking statements are based on information and management’s expectations as of the date hereof. Future results may differ materially from our current expectations. For more information regarding other potential risks and uncertainties, see the “Risk Factors” section of the Company’s Form 10-K for the fiscal year ended September 30, 2015. LRAD Corporation disclaims any intent or obligation to update those forward-looking statements, except as otherwise specifically stated. 

 

Company Contact

 

E. Brian Harvey

Director, Investor Relations and Capital Markets

858.753.8974 

ebharvey@lradx.com

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