Item
1.01
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Entry
into a Material Definitive Agreement.
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Note
Purchase Agreement and Promissory Note
On
March 18, 2020, Inpixon (the “Company”) entered into a note purchase agreement (the “Purchase Agreement”)
with Iliad Research & Trading, L.P. (the “Holder”), pursuant to which the Company agreed to issue and sell to
the Holder an unsecured promissory note (the “Note”) in an aggregate initial principal amount of $6,465,000.00 (the
“Initial Principal Amount”), which is payable on or before the date that is 12 months from the issuance date (the
“Maturity Date”). The Initial Principal Amount includes an original issue discount of $1,450,000.00 and $15,000.00
that the Company agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence, monitoring
and other transaction costs. In exchange for the Note, the Holder paid an aggregate purchase price of $5,000,000.00 (the “Transaction”).
The
Holder is the holder of an outstanding promissory note of the Company’s issued on September 17, 2019 with a current outstanding
balance as of March 17, 2020 of approximately $1.1 million. The Holder is also an affiliate of Chicago Venture Partners,
L.P. (“CVP”) and St. George Investments LLC (“St George”). CVP is a holder of the Company’s outstanding
promissory notes issued on December 21, 2018, June 27, 2019 and August 8, 2019, with outstanding balances, as of March 17, 2020
of approximately $222,000, approximately $998,000 and approximately $2.0 million, respectively. St. George is a holder of the
Company’s outstanding promissory note issued on November 22, 2019 with an outstanding balance, as of March 17, 2020 of approximately
$1.1 million.
The
terms of the Note include:
Interest.
Interest on the Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the
Note.
Prepayment.
The Company may pay all or any portion of the amount owed earlier than it is due; provided, that in the event the Company elects
to prepay all or any portion of the outstanding balance, it shall pay to the Holder 115% of the portion of the outstanding balance
the Company elects to prepay.
Redemption.
Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the Note is paid
in full, the Holder shall have the right to redeem up to an aggregate of 1/3 of the initial principal balance of the Note each
month (each monthly exercise, a “Monthly Redemption Amount”) by providing written notice (each, a “Monthly Redemption
Notice”) delivered to the Company; provided, however, that if the Holder does not exercise any Monthly Redemption Amount
in its corresponding month then such Monthly Redemption Amount shall be available for the Holder to redeem in any future month
in addition to such future month’s Monthly Redemption Amount. Upon receipt of any Monthly Redemption Notice, the Company
shall pay the applicable Monthly Redemption Amount in cash to the Holder within five business days of the Company’s receipt
of such Monthly Redemption Notice.
Monitoring
Fee. If the Note is still outstanding on the date that is six (6) months from the issuance date, then a one-time monitoring
fee equal to ten percent (10%) of the then-current outstanding balance shall be added to the Note.
Default
Events. The Note includes customary event of default provisions, subject to certain cure periods, and provides for a default
interest rate of 22%. Upon the occurrence of an event of default (except a default due to the occurrence of bankruptcy or insolvency
proceedings (the “Bankruptcy-Related Event of Default”)), the Holder may, by written notice, declare all unpaid principal,
plus all accrued interest and other amounts due under the Note to be immediately due and payable. Upon the occurrence of a Bankruptcy-Related
Event of Default, without notice, all unpaid principal, plus all accrued interest and other amounts due under the Note will become
immediately due and payable at the Mandatory Default Amount.
In
addition, at any time while the Note is outstanding, if the Company intends to enter into a financing pursuant to which it will
issue securities that (A) have or may have conversion rights of any kind, contingent, conditional or otherwise, in which the number
of shares that may be issued pursuant to such conversion right varies with the market price of the Company’s common stock,
or (B) are or may become convertible into common stock (including without limitation convertible debt, warrants or convertible
preferred stock), with a conversion price that varies with the market price of the common stock, even if such security only becomes
convertible following an event of default, the passage of time, or another trigger event or condition (a “Future Offering”),
then the Company must first offer such opportunity to the Holder to provide such financing to the Company on the same terms no
later than five (5) trading days immediately prior to the trading day of the expected announcement of the Future Offering (the
“Right of First Refusal”). If the Holder is unwilling or unable to provide such financing to the Company within five
(5) trading days from the Holder’s receipt of notice of the Future Offering from the Company, then the Company may obtain
such financing upon the exact same terms and conditions offered by the Company to the Holder, which transaction must be completed
within 30 days after the date of the notice. If the Company does not receive the financing within 30 days after the date of the
notice, then the Company must again offer the financing opportunity to the Holder as described above, and the process detailed
above will be repeated. The Right of First Refusal does not apply to an Exempt Issuance (as defined in the Purchase Agreement)
or to a registered offering made pursuant to a registration statement on Form S-1 or Form S-3.
In
addition, pursuant to the terms of the Purchase Agreement, so long as the Note is outstanding, the Holder has the right to participate
in any offering of securities by the Company which contains any term or condition more favorable to the holder of such security
or with a term in favor of the holder of such security that was not similarly provided to the Holder (the “Participation
Right”). The Participation Right does not apply in connection with an offering of securities which qualifies as an Exempt
Issuance, a transaction under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), a
registered offering made pursuant to a registration statement on Form S-1 or Form S-3, or in connection with the satisfaction
of outstanding trade payables.
The
Purchase Agreement also provides for indemnification of the Holder and its affiliates in the event that they incur loss or damage
related to, among other things, a breach by the Company of any of its representations, warranties or covenants under the Purchase
Agreement.
The
Company intends to use the net proceeds from the sale of the Note for general working capital purposes.
The
description of the Note and the Purchase Agreement is qualified in its entirety by the full text of the Note and the Purchase
Agreement, copies of which are filed herewith as Exhibits 4.1 and 10.1, respectively, and which are incorporated herein by reference.