Form of Amended and Restated Subordinated Convertible Promissory Note entered into by the Company and each of the Investors on May 29, 2019

Contract Categories: Business Finance - Note Agreements
EX-10.1 3 ex101amendrestconvnotser20.htm EXHIBIT 10.1 Exhibit



Note Series:
Date of Note:
March 29, 2019
Principal Amount of Note:

For value received ENERGY FOCUS, INC., a Delaware corporation (the “Company”), promises to pay to the undersigned holder or such party’s assigns (the “Holder”) the principal amount set forth above with simple interest on the outstanding principal amount at the rate of (i) from the date hereof until June 30, 2019, 5% per annum, and (ii) thereafter until the Maturity Date, 10% per annum. Interest shall commence with the date hereof and shall continue on the outstanding principal amount until paid in full or converted. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed. All unpaid interest and principal shall be due and payable upon request of the Majority Holders on or after December 31, 2021 (the “Maturity Date”).
(a)    Series of Notes. This convertible promissory note (the “Note”) is issued as part of a series of notes designated by the Note Series above (collectively, the “Notes”) and issued in a single closing to certain persons and entities (collectively, the “Holders”). The Company shall maintain a ledger of all Holders.
(b)    Payments. All payments of interest and principal shall be in lawful money of the United States of America, shall be made pro rata among all Holders and shall be made at such place as the Holder indicates. All payments shall be applied first to accrued interest, and thereafter to principal.
(c)    Prepayment. The Company may not prepay this Note prior to the Maturity Date without the consent of the Holders of a majority of the outstanding principal amount of the Notes (the “Majority Holders”).
(a)    Automatic Conversion. The outstanding principal amount of this Note and any unpaid accrued interest (in total, the “Aggregate Outstanding Amount”) shall automatically convert in whole


without any further action by the Holder into the number of shares of the Company’s Series A Convertible Preferred Stock (the “Preferred Stock”), determined by dividing (x) the Aggregate Outstanding Amount of this Note by (y) $0.67 (the “Conversion Rate”), on the first business day following the date on which the Company’s stockholders approve the transactions contemplated herein, including (A) the issuance of shares of the Company’s Common Stock upon the conversion of the shares of Preferred Stock in excess of the number of shares of Common Stock permitted by Rule 5635(d)(1)(B) or Rule 5635(b), as applicable, of the Rules of the Nasdaq Stock Market, and (B) the increase in the number of authorized and available shares of Preferred Stock pursuant to the Company’s Certificate of Incorporation, as amended.
(b)    Procedure for Conversion. In connection with any conversion of this Note into Preferred Stock, the Holder shall surrender this Note to the Company and deliver to the Company any documentation reasonably required by the Company.  Such conversion shall be deemed to have been effected as of the close of business on the Automatic Conversion Date. The Company shall not be required to deliver the Preferred Stock into which this Note may convert until the Holder has surrendered this Note to the Company and delivered to the Company any such documentation.  No fractional shares of Preferred Stock shall be issued to the Holder upon the conversion of the Note. The Company shall round up the result of the Conversion Rate to the nearest whole share. Provided that this Note has been surrendered and such additional required documentation has been delivered, as soon as practicable (but in no event more than 10 calendar days following the Automatic Conversion Date), the Company shall deliver to the Holder, certificates representing the number of shares of Preferred Stock issuable upon such conversion registered in such name or names and such denomination or denominations as the Holder shall have specified.
(a)    If there shall be any Event of Default (as defined below) hereunder, at the option and upon the declaration of the Majority Holders and upon written notice to the Company (which election and notice shall not be required in the case of an Event of Default under subsection (ii) or (iii) below), this Note shall accelerate and all principal and unpaid accrued interest shall become due and payable. The occurrence of any one or more of the following shall constitute an “Event of Default”:
(i)    The Company fails to pay timely any of the principal amount due under this Note on the date the same becomes due and payable or any unpaid accrued interest or other amounts due under this Note on the date the same becomes due and payable;
(ii)    The Company files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing;
(iii)    An involuntary petition is filed against the Company (unless such petition is dismissed or discharged within sixty (60) days under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee or assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of the Company);
(iv)    default in the obligation of the Company for borrowed money, other than this Note, which shall continue for a period of sixty (60) days, or any event that results in acceleration of the maturity of any indebtedness of the Company under any note, indenture, contract, or agreement;


(v)    any levy, seizure, attachment, lien, or encumbrance of or on the Company’s property, other than those existing as of the date hereof, which is not discharged by the Company within twenty (20) days.
(b)    In the event of any Event of Default hereunder, the Company shall pay all reasonable attorneys’ fees and court costs incurred by the Holder in enforcing and collecting this Note.
(c)    The obligations of the Company to pay the principal balance and interest due to the Holder shall be absolute and unconditional and the Company shall make such payment without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including, without limitation, any defense, setoff, recoupment, or counterclaim which the Company may have or assert against the Holder or any other person.
(a)    Waivers. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.
(b)    Further Assurances. The Holder agrees and covenants that at any time and from time to time the Holder will promptly execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Note and to comply with state or federal securities laws or other regulatory approvals.
(c)    Transfers of Notes. This Note may be transferred only upon its surrender to the Company for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument of transfer in form satisfactory to the Company to a party that provides to the Company a joinder agreement to the Note Purchase Agreement dated March 29, 2019 entered into by the initial Holder hereof (the “Purchase Agreement”), causing the transferee to agree and become entitled to the terms, rights and conditions set forth therein, including without limitation, making the representations set forth in Section 3.2 thereof. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new Note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of the Company’s obligation to pay such interest and principal.
(d)    Amendment and Waiver. Any term of this Note may be amended or waived with the written consent of the Company and the Holder. In addition, any term of this Note may be amended or waived with the written consent of the Company and the Majority Holders. Upon the effectuation of such waiver or amendment with the consent of the Majority Holders in conformance with this paragraph, such amendment or waiver shall be effective as to, and binding against the holders of, all of the Notes and the Company shall promptly give written notice thereof to the Holder if the Holder has not previously consented to such amendment or waiver in writing; provided that the failure to give such notice shall not affect the validity of such amendment or waiver.
(e)    Governing Law. This Note shall be governed by and construed under the laws of the State of Delaware, as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware, without giving effect to conflicts of laws principles.
(f)    Binding Agreement. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Note, expressed


or implied, is intended to confer upon any third party any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note.
(g)    Counterparts; Manner of Delivery. This Note may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
(h)    Titles and Subtitles. The titles and subtitles used in this Note are used for convenience only and are not to be considered in construing or interpreting this Note.
(i)    Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications to a party shall be sent to the party’s address set forth on the signature page hereto or at such other address(es) as such party may designate by ten (10) days’ advance written notice to the other party hereto.
(j)    Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to the Holder, upon any breach or default of the Company under this Note shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character by the Holder of any breach or default under this Note, or any waiver by the Holder of any provisions or conditions of this Note, must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Note, or by law or otherwise afforded to the Holder, shall be cumulative and not alternative. This Note shall be void and of no force or effect in the event that the Holder fails to remit the full principal amount to the Company within five (5) calendar days of the date of this Note.
(k)    Entire Agreement. This Note and the Purchase Agreement constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof, and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein.
(l)    Exculpation among Holders. The Holder acknowledges that the Holder is not relying on any person, firm or corporation, other than the Company and its officers and Board members, in making its investment or decision to invest in the Company.
(m)    Senior Indebtedness. The obligations evidenced by this Note are hereby expressly subordinated in right of payment to the prior payment in full of all of the Company’s obligations under that certain Loan and Security Agreement, dated as of December 11, 2018, between Austin Financial Services, Inc. and the Company (the “Senior Indebtedness”). Notwithstanding the foregoing, the Holder shall be entitled to receive (a) equity securities of the Company from the conversion of all or any part of the obligations evidenced by this Note, (b) any note, instrument or other evidence of indebtedness which may be issued by the Company in exchange for or in substitution of this Note, provided that such note, instrument or other


evidence of indebtedness is subordinated to the Senior Indebtedness on the same terms and conditions as set forth in this Section 4(m) and (c) other payments consented to in writing by holders of Senior Indebtedness.
(n)    Broker’s Fees. Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker’s or finder’s fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation in this subsection being untrue.
[Signature pages follow]


The parties have executed this AMENDED AND RESTATED SUBORDINATED CONVERTIBLE PROMISSORY NOTE as of the date first noted above.


Energy Focus, Inc.
/s/ James Tu
James Tu
Chairman of the Board, Chief Executive Officer and President
32000 Aurora Road – Suite B
Solon, Ohio 44139



The parties have executed this SUBORDINATED CONVERTIBLE PROMISSORY NOTE as of the date first noted above.

HOLDER (if an entity):
Name of Holder:

HOLDER (if an individual):
Name of Holder: