Document:

iddr_ex102.htm

EXHIBIT 10.2

 

Summit Trading, LTD

 

NEITHER THE ISSUANCE NOR SALE OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE (THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE NOTE AND THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE OR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE NOTE.

 

	
Principal Amount: $61,000.00
	
Issue Date: July 10, 2017

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, IDdriven, Inc., a Nevada corporation (hereinafter referred to as “Borrower”), hereby promises to pay to the order of Summit Trading, Ltd. or its registered assigns (the “Holder”) the principal sum of $61,000 plus accrued interest on the Exchange Notes (as defined below).00, together with interest from the date hereof at the rate of twenty percent (20%) per annum, at maturity or upon acceleration or otherwise, as set forth herein (this “Note”). Such interest shall accrue from the date of payment to Borrower as to each payment, and shall be computed on the basis of a 365-day year and the actual number of days elapsed. 

 

The consideration to the Borrower for this Note is the exchange of (i) a Promissory Note in the principal amount of $51,000 issued by the Borrower to the Holder on December 30, 2016, plus accrued interest (the “December 2016 Note”) and (ii) a Promissory Note in the principal amount of $10,000 issued by the Borrower to the Holder on January 26, 2017 plus accrued interest (the “January 2017 Note”). The December 2016 Note and the January 2017 Note are collectively referred to as the “Exchange Notes” and the “Consideration”). Upon issuance this Note, the Exchange Notes are hereby deemed cancelled.

 

All references in this Note to the principal amount then due hereunder shall refer to the Consideration. The maturity date for the Note shall be twelve (12) months from the Issue Date (the “Maturity Date”), and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees relating to this Note, shall be due and payable. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. 

 

Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) twenty-two percent (22%) and (ii) the highest rate allowed by law, per annum from the due date thereof until the same is paid (“Default Interest”). Default Interest shall commence accruing on the date that the applicable payment is not made as required herein and shall be computed on the basis of a 365-day year and the actual number of days elapsed. 

 

All payments due hereunder (to the extent not converted into the Borrower’s common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.

 

	 
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This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and the shares of Common Stock issued upon conversion of this Note will, upon payment of the Conversion Price (as defined below) to the Borrower, not impose personal liability upon the holder thereof.

 

The following additional terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1 Conversion Right. The Holder shall have the right at any time to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso in the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit "A" (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

1.2 Conversion Price.

 

(a) Calculation of Conversion Price. The Conversion Price shall equal the Variable Conversion Price (as defined herein) (subject, in each case, to adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events that occur on or after the Issue Date) (also subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Prices” means, for any security as of any date, the closing bid price on the OTCQB, OTC Pink or applicable tier of the OTC Markets or other trading market (the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder in Holder’s sole discretion (i.e. Quote Stream), or if the OTCQB is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Trading Prices cannot be calculated for such security on such date in the manner provided above, the Trading Prices shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Prices are required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. In the event that shares of the Borrower’s Common Stock are not deliverable via DWAC following the conversion of any amount hereunder, an additional ten percent (10%) discount shall be factored into the Variable Conversion Price until this Note is no longer outstanding (resulting in a discount rate of 50% assuming no other adjustments are triggered hereunder). 

 

	 
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(b) Each time, while this Note is outstanding, the Borrower enters into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), including but not limited to the issuance of new promissory notes or of a replacement promissory note (a “Section 3(a)(9) Transaction”), or into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, to Section 3(a)(10) of the Securities Act (a “Section 3(a)(10) Transaction”), in which any 3rd party has the right to convert monies owed to that 3rd party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price in effect at that time (prior to all other applicable adjustments in this Note), then the Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction, or Section 3(a)(10) Transaction, in which any 3rd party has a look back period greater than the look back period in effect under the Note at that time (currently a twenty (20) Trading Day look back period as described in this Section 1.2(a) applies), then the Holder’s look back period shall automatically be adjusted to such greater number of days until this Note is no longer outstanding. The Borrower shall give written notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each adjustment that is applicable due to the triggering event), within one (1) business day of an event that requires any adjustment described in the two immediately preceding sentences. 

 

1.3 Authorized Shares. The Borrower covenants that within 30 days from the Issue Date it will increase the number of authorized shares of its Common Stock to an amount that will allow it to keep available, during the period the conversion right exists under this Note, out of its authorized and unissued Common Stock, a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note (without regard to any limitations on conversion). The Borrower is required at all times to have authorized and reserved two times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). For purposes of computing the Reserved Amount as of the Issue Date, the Market Price on the Trading Day prior to the Issue Date shall be used. The Reserved Amount shall be increased from time to time, but no less frequently than the end of each calendar quarter or within 10 days of demand by Holder, in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Within 30 days from the Issue Date and from time to time upon the Borrower’s making a determination of the Reserved Amount as provided for herein, the Borrower shall deliver to the Holder a share reservation agreement signed by the Borrower and its transfer agent in a form satisfactory to the Holder reflecting a Reserved Amount as provided for in this Section 1.3. If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2.

 

1.4 Method of Conversion.

 

(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower. 

 

	 
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(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof.

 

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.

 

	 
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(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3, which failure shall be an Event of Default) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Securities Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an “accredited investor” (as defined in Rule 501(a) of the Securities Act). Except as otherwise provided (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate or electronic book entry for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

	
 
	
“NEITHER THE OFFER, ISSUANCE OR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE 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 (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
	
 

 

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Securities Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S under the Securities Act, at the Deadline, and such opinion has, in the opinion of the Borrower’s counsel, been properly rendered, it will be considered an Event of Default pursuant to Section 3.2.

 

	 
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1.6 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

 

ARTICLE II. CERTAIN COVENANTS

 

2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

 

2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default as set forth in Sections 3.1 through 3.13, inclusive, occur, then an “Event of Default” hereunder shall occur:

 

3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, and such breach continues for a period of five (5) days after written notice thereof to the Borrower from the Holder.

 

3.2 Conversion and the Shares. The Borrower fails to reserve a sufficient amount of shares of common stock as required under the terms of this Note (including Section 1.3)(and such breach continues for a period of five (5) days after written notice thereof to the Borrower from the Holder, fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within five (5) business days of a demand from the Holder, either in cash or as an addition to the balance of the Note, and such choice of payment method is at the discretion of the Borrower.

 

	 
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3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

 

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.

 

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

 

3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $25,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

 

3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing or quotation of the Common Stock on the OTC PINK or an equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE MKT.

 

3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act, and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

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

 

3.13 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

3.15 Replacement of Transfer Agent. In the event that the Borrower replaces its transfer agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

	 
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3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any other financial instrument, including but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder (the “Other Agreements”), after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note by reason of a default under said Other Agreement or hereunder.

 

3.17 No bid. At any time while this Note is outstanding, the lowest Trading Prices on the OTCQB or other applicable principal trading market for the Common Stock is equal to or less than $0.0001.

 

In the event of an Event of Default, the Borrower shall pay to the Holder, in full satisfaction of Borrower’s obligations hereunder, an amount equal to 150% of the then outstanding principal amount due hereunder (including the principal amount advanced to Borrower hereunder and not subsequently converted under Article I or repaid by Borrower and accrued and unpaid interest thereon) plus Default Interest, if any, plus any amounts owed to the Holder pursuant to Section 1.4(g) (collectively, in the aggregate of all of the above, the “Default Sum”), and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

 

If the Borrower fails to pay the Default Sum within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Sum, the number of shares of Common Stock of the Borrower equal to the Default Sum divided by the Conversion Price then in effect, subject to issuance in tranches due to the beneficial ownership limitations contained in this Note.

 

ARTICLE IV. MISCELLANEOUS

 

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2 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, telegram, facsimile, or electronic mail 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, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, 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. The addresses for such communications shall be: 

 

	 
	8
	

 
	 

 

If to the Borrower:

 

IDdriven, Inc.

13355 Moss Rock Drive

Auburn, California 95602

Attention: Arend Verweij, President

email: averweij@iddriven.com

 

With a copy, which shall not constitute notice, to:

 

Legal & Compliance, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

E-mail: LAnthony@legalandcompliance.com

Attention: Laura Anthony, Esq.

 

If to the Holder:

 

Summit Trading, LTD

_______________________

 

E-mail: _______________________

 

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

 

4.6 Governing Law and Venue. 

 

(a) Except in the case of the Mandatory Forum Selection provisions in Section 4.6(b) below, which clause shall be governed and interpreted in accordance with Florida law, this Note shall be delivered and accepted in and shall be deemed to be a contract made under and governed by the internal laws of the State of Nevada, and for all purposes shall be construed in accordance with the laws of such State, without giving effect to the choice of law provisions of such State. 

 

(b) Mandatory Forum Selection. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state and/or federal courts of Florida. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it 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 other manner permitted by law.

 

	 
	9
	

 
	 

 

4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.8 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required. 

 

4.9 Section 3(a)(10) Transactions. If at any time while this Note is outstanding, the Borrower enters into a Section 3(a)(10) Transaction, then a liquidated damages charge of 25% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment or as an addition to the balance of the Note, as determined by mutual agreement of the Borrower and Holder.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the Issue Date. 

 

	

	
IDdriven, Inc.
	
 

	
 
	
 
	
 
	
 

		
By: 
	

/s/ Arend Verweij
	
 

	

	
 
	
Arend Verweij, Chief Executive Officer
	
 

 

	 
	10
	

 
	 

 

EXHIBIT A -- NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of IDdriven, Inc., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of July___, 2017 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. 

 

Box Checked as to applicable instructions:

 

	
 
	
[  ]
	
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

	
 
	
 
	
 

	
 
	
 
	
Name of DTC Prime Broker: 

Account Number: 

	
 
	
 
	
 

	
 
	
[  ]
	
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

	
 
	
 

 
	
[___]

e-mail: [___]
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
Date of Conversion:
	
 
	
 
	
 

	
 
	
 
	
Applicable Conversion Price: 
	
$
	
 
	
 

	
 
	
 
	
Number of Shares of Common Stock to be Issued 
	
 
	
 
	
 

	
 
	
 
	
Pursuant to Conversion of the Notes: 
	
 
	
 
	
 

	
 
	
 
	
Amount of Principal Balance Due remaining
	
 
	
 
	
 

	
 
	
 
	
Under the Note after this conversion:
	
 
	
 
	
 

 

	
 
	
 
	
By:____________________________
	
 

	
 
	
 
	
Name: [___]
	
 

	
 
	
 
	
Date: _________________________
	
 

 

 

	
11ex10-1.htm

Exhibit 10.1

   

AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is entered into as of July 7, 2017 among Kona Grill, Inc., a Delaware corporation (the “Borrower”), the Lenders (as defined below) party hereto and KeyBank National Association, as the administrative agent (the “Administrative Agent”).

 

RECITALS:

 

A.     The Borrower, the Administrative Agent and the lenders from time to time party thereto (the “Lenders”) are parties to the Second Amended and Restated Credit Agreement, dated as of October 12, 2016 (as previously amended and as the same may from time to time be further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).

 

B.     The Borrower, the Administrative Agent and the Lenders party hereto desire to (i) reduce the Revolving Commitments from $45,000,000 to $30,000,000 and (ii) amend the Credit Agreement to modify certain provisions thereof as set forth herein.

 

AGREEMENT:

 

In consideration of the premises and mutual covenants herein and for other valuable consideration, the Borrower, the Administrative Agent and the Lenders agree as follows:

 

Section 1. Definitions. Unless otherwise defined herein, each capitalized term used in this Amendment and not defined herein shall be defined in accordance with the Credit Agreement.

 

Section 2. Amendments.

 

2.1     New Definitions. Section 1.01 of the Credit Agreement is hereby amended to add the following new definitions thereto:

 

(i)     “Amendment No. 2” means Amendment No. 2 to Second Amended and Restated Credit Agreement, dated as of July 7, 2017, among the Borrower, the Administrative Agent and the Lenders party thereto.

 

(ii)     “Amendment No. 2 Effective Date” means June 30, 2017.

 

(iii)     “Extension Notice” has the meaning provided in Section 2.17.

 

2.2     Amendments to Certain Definitions. 

 

(i)     Section 1.01 of the Credit Agreement is hereby amended by deleting the term “Non-Extending Lender”. 

 

 

 

 

 

(ii)     The table in clause (ii) of the definition of “Applicable Margin” is hereby deleted in its entirety and replaced with the following:

 

	
Leverage Ratio
	
Applicable Margin 

for Base Rate Loans
	
Applicable Margin for

LIBOR Rate Loans

	
Greater than or equal to 4.75 to 1.00
	
300.0 bps
	
400.0 bps

	
Greater than or equal to 3.50 to 1.00 but less than 4.75 to 1.00
	
250.0 bps
	
350.0 bps

	
Greater than or equal to 3.00 to 1.00 but less than 3.50 to 1.00
	
200.0 bps
	
300.0 bps

	
Greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00
	
175.0 bps
	
275.0 bps

	
Greater than or equal to 2.00 to 1.00 but less than 2.50 to 1.00
	
125.0 bps
	
225.0 bps

	
Less than 2.00 to 1.00
	
100.0 bps
	
200.0 bps

 

 

(iii)     The definition of “Consolidated EBITDAR” is hereby amended and restated as follows:

 

“Consolidated EBITDAR” means, for any period, Consolidated Net Income for such period, plus, without duplication, in each case only to the extent deducted in determining such Consolidated Net Income, (A) (i) Consolidated Interest Expense for such period, (ii) Consolidated Depreciation and Amortization Expense for such period, (iii) Consolidated Tax Expense for such period, (iv) Consolidated Rental Expense for such period, (v) the aggregate amount of non-cash expenses relating to stock-based compensation reducing Consolidated Net Income, (vi) pre-opening store expenses paid in cash in an aggregate amount not to exceed $550,000 plus all non-cash pre-opening store expenses, in each case per leasehold location for such period, (vii) lease termination, asset write-off and exit costs associated with restaurant closures or the termination of a previously signed lease reasonably acceptable to the Administrative Agent and (viii) losses on sales of assets and losses that are properly classified under GAAP as extraordinary and other non-recurring non-cash losses less (B) gains on sales of assets and gains that are properly classified under GAAP as extraordinary and other non-recurring non-cash gains, all as determined for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP; provided, however, that Consolidated EBITDAR for any Testing Period shall (y) include the Consolidated EBITDAR for any Person or business unit that has been acquired by the Borrower or any of its Subsidiaries for any portion of such Testing Period prior to the date of acquisition, so long as such Consolidated EBITDAR has been verified by appropriate audited financial statements or other financial statements reasonably acceptable to the Administrative Agent and (z) exclude the Consolidated EBITDAR for any Person or business unit that has been disposed of by the Borrower or any of its Subsidiaries, for the portion of such Testing Period prior to the date of disposition in any twelve-month period.

 

(iv)     The definition of “Consolidated Rental Expense” is hereby amended and restated as follows:

 

“Consolidated Rental Expense” means, for any period, the aggregate amount of all fixed payments paid in cash that the Borrower and its Subsidiaries are required to make as lessee under, or by the terms of, any lease of real property during such period; provided, however, that Consolidated Rental Expense for any period shall exclude the payments associated with any leased real property for which the Borrower and its Subsidiaries has terminated the lease applicable to such leased real property as of the last day of such period so long as no payments are made (or required to be made) by the Borrower or its Subsidiaries after the date such lease is terminated.

 

 

-2-

 

 

(v)     The definition of “Maturity Date” is hereby amended and restated as follows

 

“Maturity Date” means (a) with respect to the Revolving Credit Facility, October 12, 2019, subject to the extension thereof pursuant to Section 2.17, (b) with respect to the Initial Term Facility, October 12, 2019, subject to the extension thereof pursuant to Section 2.17, and (c) with respect to any Incremental Term Facility, as determined in accordance with Section 2.16, provided that, in each case, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

 

(vi)     The definition of “Revolving Facility Termination Date” is hereby amended and restated as follows:

 

“Revolving Facility Termination Date” means the earlier of (i) October 12, 2019, subject to the extension thereof pursuant to Section 2.17, or (ii) the date that the Commitments have been terminated pursuant to Section 8.02.

 

(vii)     The definition of “Total Revolving Commitment” is hereby amended and restated as follows:

 

“Total Revolving Commitment” means the sum of the Revolving Commitments of the Revolving Lenders as the same may be decreased pursuant to Section 2.11(b) or increased pursuant to Section 2.16. As of the Amendment No. 2 Effective Date, the amount of the Total Revolving Commitment is $30,000,000.

 

2.3     Amendment to Section 2.12(b)(i). The table set forth in Section 2.12(b)(i) of the Credit Agreement is hereby amended and restated as follows:

 

	
Fiscal Quarter Ending
	
Repayment Percentage

	
December 31, 2016
	
1.25%

	
March 31, 2017

June 30, 2017

September 30, 2017

December 31, 2017
	
1.25%

1.25%

1.25%

1.25%

	
March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018
	
1.25%

1.25%

1.25%

1.875%

	
March 31, 2019

June 30, 2019

September 30, 2019
	
1.875%
1.875%

1.875%

	
Maturity Date with respect to the Initial Term Loans
	
All outstanding principal amount of the Initial Term Loans

 

 

 

-3-

 

 

; provided, however, that if the Maturity Date is extended pursuant to Section 2.17, the foregoing table shall be automatically replaced with the following:

 

	
Fiscal Quarter Ending
	
Repayment Percentage

	
December 31, 2016
	
1.25%

	
March 31, 2017

June 30, 2017

September 30, 2017

December 31, 2017
	
1.25%

1.25%

1.25%

1.25%

	
March 31, 2018

June 30, 2018

September 30, 2018

December 31, 2018
	
1.25%

1.25%

1.25%

1.875%

	
March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019
	
1.875%
1.875%

1.875%

1.875%

	
March 31, 2020

June 30, 2020

September 30, 2020
	
1.875%
1.875%

1.875%

	
Maturity Date with respect to the Initial Term Loans
	
All outstanding principal amount of the Initial Term Loans

 

 

2.4     Amendment to Section 2.17. Section 2.17 of the Credit Agreement is hereby amended and restated as follows:

 

Section 2.17     Maturity Extension.   At least 30 days prior to the existing Maturity Date, the Borrower may request an extension to both the Revolving Facility Termination Date and the Maturity Date to October 12, 2020 by delivering a written extension notice to the Administrative Agent and the Lenders (such notice, the “Extension Notice”). The Borrower shall certify in such Extension Notice that (i) as of and on such date, no Default or Event of Default has occurred and is continuing, (ii) the representations and warranties of each Credit Party set forth in this Agreement and the other Loan Documents are true and correct in all material respects (or in the case of any representation and warranty that is already subject to a materiality qualifier, true and correct) on and as of such date, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case such representations and warranties continue to be true and correct in all material respects (or in the case of any representation and warranty that is already subject to a materiality qualifier, true and correct) as of such specified earlier date, (iii) the pro forma Leverage Ratio of the Borrower as of such date is not greater than 4.25 to 1.00, (iv) the Borrower is in pro forma covenant compliance with Section 7.07 after giving effect to covenant modifications set forth therein to occur upon such extension, and (v) the calculations attached thereto evidence compliance with the conditions set forth in clauses (iii) and (iv) hereof. Upon satisfaction of the foregoing, the Administrative Agent shall so notify the Borrower, and the Revolving Facility Termination Date and the Maturity Date shall be extended to October 12, 2020 and all references in the Loan Documents to the “Revolving Facility Termination Date” and the “Maturity Date” shall refer to the Revolving Facility Termination Date and the Maturity Date as so extended. For the avoidance of doubt, the Revolving Facility Termination Date and the Maturity Date may be extended pursuant to this Section 2.17 on not more than one occasion during the term of this Agreement.

 

 

-4-

 

 

2.5     Amendment to Section 7.07. Section 7.07 of the Credit Agreement is hereby amended and restated as follows:

 

Section 7.07     Financial Covenants.

 

(a)     Leverage Ratio. The Credit Parties will not permit the Leverage Ratio of the Credit Parties and their Subsidiaries to be greater than the maximum ratio specified below at any time during the fiscal quarter ended on the date set forth opposite such maximum ratio:

 

	
Fiscal Quarter 
	
Maximum Leverage Ratio

	
June 30, 2017
	
5.50 to 1.00

	
September 30, 2017
	
5.50 to 1.00

	
December 31, 2017
	
5.50 to 1.00

	
March 31, 2018
	
5.25 to 1.00

	
June 30, 2018
	
5.25 to 1.00

	
September 30, 2018
	
5.25 to 1.00

	
December 31, 2018
	
5.25 to 1.00

	
March 31, 2019 and each fiscal quarter thereafter
	
5.00 to 1.00

 

 

Notwithstanding anything to the contrary in this Section 7.07(a), if (x) the Borrower declares, pays or makes any Restricted Payment pursuant to Section 7.06(d) or (y) the Borrower extends the Maturity Date pursuant to Section 2.17 or if the Maturity Date is extended beyond October 12, 2019, effective immediately upon the declaration, payment or making of such Restricted Payment or such extension and thereafter during the term of this Agreement, the Credit Parties will not permit at any time the Leverage Ratio of the Credit Parties and their Subsidiaries to be greater than 4.25 to 1.00.

 

(b)     Fixed Charge Coverage Ratio. The Credit Parties will not permit at any time the Fixed Charge Coverage Ratio of the Credit Parties and their Subsidiaries to be less than the minimum ratio specified below at any time during the fiscal quarter ended on the date set forth opposite such minimum ratio:

 

	
Fiscal Quarter
	
Minimum Fixed Charge Coverage Ratio

	
June 30, 2017
	
1.25 to 1.00

	
September 30, 2017
	
1.20 to 1.00

	
December 31, 2017
	
1.20 to 1.00

	
March 31, 2018
	
1.20 to 1.00

	
June 30, 2018
	
1.20 to 1.00

	
September 30, 2018
	
1.20 to 1.00

	
December 31, 2018
	
1.20 to 1.00

	
March 31, 2019 and each fiscal quarter thereafter
	
1.30 to 1.00

 

 

Notwithstanding anything to the contrary in this Section 7.07(b), if the Borrower declares, pays or makes any Restricted Payment pursuant to Section 7.06(d), effective immediately upon the declaration, payment or making of such Restricted Payment and thereafter during the term of this Agreement, the Credit Parties will not permit at any time the Fixed Charge Coverage Ratio of the Credit Parties and their Subsidiaries to be less than 1.50 to 1.00.

 

 

-5-

 

 

2.6     Amendment to Schedule 1. The column “Revolving Commitment” set forth on Schedule 1 of the Credit Agreement is hereby amended and restated as follows:

 

	
Lender
	
Revolving 
Commitment

	
KEYBANK NATIONAL ASSOCIATION
	
$17,500,000

	
ZB N.A. DBA ZIONS FIRST NATIONAL BANK
	
$12,500,000

	
All Lenders Total
	
$30,000,000

 

Section 3. Effectiveness.

 

3.1     Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

 

(i)     Amendment Executed. This Amendment shall have been executed by the Borrower, each Subsidiary Guarantor, the Administrative Agent and the Required Lenders, and counterparts hereof as so executed shall have been delivered to the Administrative Agent.

 

(ii)      Officer’s Certificate. The Administrative Agent shall have received an Officer's Certificate from the Borrower certifying that, after giving effect to this Amendment, (a) all representations and warranties of the Credit Parties contained herein or in the other Loan Documents are true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the Amendment Effective Date and the date hereof, except to the extent that such representations and warranties expressly relate to an earlier specified date, in which case such representations and warranties shall have been true and correct in all material respects as of the date when made, and (b) no Default or Event of Default has occurred and is continuing.

 

(iii)     Fees and Expenses. The Administrative Agent shall have received (a) all expenses (including reasonable fees and disbursements of counsel to the Administrative Agent) in connection with the preparation, negotiation and effectiveness of this Amendment, (b) all fees payable by the Borrower pursuant to the Engagement Letter, dated as of July 7, 2017, between the Administrative Agent and the Borrower, and (c) any other amounts due and payable by the Borrower under the Credit Agreement on or prior to the date hereof.

 

(iv)     Other Matters. The Borrower and each Subsidiary Guarantor shall have provided such other items and shall have satisfied such other conditions as may be reasonably required by the Administrative Agent.

 

3.2     Amendment Effective Date. This Amendment shall be effective as of June 30, 2017 (the “Amendment Effective Date”) upon the satisfaction of the conditions precedent set forth above. Unless otherwise specifically set forth herein, each of the amendments and other modifications set forth in this Amendment shall be effective on and after the Amendment Effective Date.

 

 

 

-6-

 

 

Section 4. Miscellaneous.

 

4.1     Representations and Warranties. The Borrower and each Subsidiary Guarantor, by signing below, hereby represents and warrants to the Administrative Agent and the Lenders that:

 

(i)     the Borrower and each Subsidiary Guarantor has the legal power and authority to execute and deliver this Amendment;

 

(ii)     the officers executing this Amendment on behalf of the Borrower and each Subsidiary Guarantor have been duly authorized to execute and deliver the same and bind the Borrower or such Subsidiary Guarantor with respect to the provisions hereof;

 

(iii)     the execution and delivery hereof by the Borrower or each Subsidiary Guarantor and the performance and observance by the Borrower and each Subsidiary Guarantor of the provisions hereof do not violate or conflict with the Organizational Documents of the Borrower or any Subsidiary Guarantor or any law applicable to the Borrower or any Subsidiary Guarantor or result in a breach of any provision of or constitute a default under any other agreement, instrument or document binding upon or enforceable against the Borrower or such Subsidiary Guarantor;

 

(iv)     immediately after giving effect to this Amendment, no Default or Event of Default exists under the Credit Agreement, nor will any occur immediately after the execution and delivery of this Amendment or by the performance or observance of any provision hereof;

 

(v)     neither the Borrower nor any Subsidiary Guarantor has any claim or offset against, or defense or counterclaim to, any obligations or liabilities of the Borrower or such Subsidiary Guarantor under the Credit Agreement or any other Loan Document;

 

(vi)     this Amendment constitutes a valid and binding obligation of the Borrower and each Subsidiary Guarantor in every respect, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies; and

 

(vii)     each of the representations and warranties set forth in Article V of the Credit Agreement is true and correct in all material respects as of the date hereof, except to the extent that any thereof expressly relate to an earlier date.

 

4.2     Credit Agreement Unaffected. Each reference to the Credit Agreement or in any other Loan Document shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically provided, all provisions of the Credit Agreement shall remain in full force and effect and be unaffected hereby. This Amendment is a Loan Document. 

 

4.3     Subsidiary Guarantor Acknowledgment. Each Subsidiary Guarantor, by signing this Amendment:

 

(i)     consents and agrees to and acknowledges the terms of this Amendment;

 

(ii)     acknowledges and agrees that all of the Loan Documents to which such Subsidiary Guarantor is a party or otherwise bound shall continue in full force and effect and that all of such Subsidiary Guarantor’s obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment;

 

 

-7-

 

 

(iii)     represents and warrants to the Administrative Agent and the Lenders that all representations and warranties made by such Subsidiary Guarantor and contained in this Amendment or any other Loan Document to which it is a party are true and correct in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of the Amendment Effective Date, except to the extent that any thereof expressly relate to an earlier date; and

 

(iv)     acknowledges and agrees that (A) notwithstanding the conditions to effectiveness set forth in this Amendment, such Subsidiary Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to which such Subsidiary Guarantor is a party to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (B) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Subsidiary Guarantor to any future amendments or modifications to the Credit Agreement.

 

4.4     Waiver. The Borrower and each Subsidiary Guarantor, by signing below, hereby waives and releases the Administrative Agent and each of the Lenders and their respective Related Parties from any and all claims, offsets, defenses and counterclaims of which the Borrower and any Subsidiary Guarantor is aware, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.

 

4.5     Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, amend, or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any Credit Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply and be effective solely with respect to the matters expressly referred to herein.

 

4.6     Entire Agreement. This Agreement, together with the Credit Agreement and the other Loan Documents integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.

 

4.7     Counterparts This Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.

 

4.8     Governing Law. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). TO THE FULLEST EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK GOVERNS THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

 

 

-8-

 

 

4.9     JURY TRIAL WAIVER. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY AMENDMENTS, WAIVERS OR OTHER MODIFICATIONS RELATING TO ANY OF THE FOREGOING), OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

[Signature pages follow.]

 

 

-9-

 

 

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered as of the date first above written.

 

	 	
KONA GRILL, INC., as the Borrower 

	 	 	 
	  	
By:
	/s/ Berke Bakay
	 	 	Name:   Berke Bakay
	 	 	Title:    Chief Executive Officer and President

 

 

 

 

	 	
KEYBANK NATIONAL ASSOCIATION, as the
Administrative Agent and as a Lender

	 	 	 
	  	
By:
	/s/ Marianne T. Meil
	 	 	
Name: Marianne T. Meil

	 	 	Title: Senior Vice President

 

 

 

  

	 	ZB, N.A. DBA ZIONS FIRST NATIONAL BANK, as a Lender
	 	 	 
	  	
By:
	/s/ Adam Whitefield 
	 	 	Name:   Adam Whitefield
	 	 	Title:    Vice President

 

 

 

  

Each of the undersigned acknowledge the terms of and consent to the foregoing:

 

KONA RESTAURANT HOLDINGS, INC., 

KONA SUSHI, INC.,

KONA MACADAMIA, INC.,

KONA BALTIMORE, INC.,

KONA GRILL INTERNATIONAL HOLDINGS, INC.,

KONA GRILL INTERNATIONAL, INC., 

KONA GRILL PUERTO RICO, INC.,

   each as a Subsidiary Guarantor

 

 

By: /s/ Berke Bakay                      

Name: Berke Bakay

Title: President

 

 

KONA TEXAS RESTAURANTS, INC.,

   as a Subsidiary Guarantor

 

 

By: /s/ Christi Hing                   

Name: Christi Hing

Title: Secretary

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