WIRELESS RONIN TECHNOLOGIES, INC. NOTE CONVERSION AGREEMENT
EXHIBIT 4.12
WIRELESS RONIN TECHNOLOGIES, INC.
NOTE CONVERSION AGREEMENT entered into and by and between Wireless Ronin Technologies, Inc., a
Minnesota corporation (the “Company”) and SHAG LLC (“Lender”).
WHEREAS, the Company is indebted to Lender by reason of a loan evidenced the short-term Note
described on the attached Schedule A (the “Note”);
WHEREAS, the Company has advised Lender that the Company intends to borrow up to $2,000,000
pursuant to the sale of 12% convertible promissory Notes (the “Bridge Notes”); and
WHEREAS, the Company has advised Lender that it intends to make a public offering of its
common stock pursuant to a registration statement to be filed on or about April 2006 (the “IPO”)
and that the Company is required by the proposed underwriter of such offering to cause its
outstanding notes or convertible debentures to be converted into common stock of the Company upon
the completion of the IPO; and
WHEREAS, Lender has agreed with the Company that upon the closing of the Company’s IPO to
convert Lender’s Note into the Company’s common stock on the terms provided below.
NOW THEREFORE, in consideration of the agreements and covenants hereinafter set forth, the
Company and Lender hereby agree as follows:
1. The Note. References to “Note” herein means the short-term note held by Lender, as specified on
Schedule A. The aggregate amount of the Company’s indebtedness to Lender under the Note is
hereinafter referred to as the “Principal Indebtedness.”
2. Principal and Interest. The amount of the Company’s Principal Indebtedness to Lender and the
amount of interest and penalty due Lender as of February 11, 2006 is correctly set forth in
Schedule A.
3. Amendment of the Note. Lender agrees to the following amendments to the Note.
(a) Maturity Date. The maturity date of the Note is currently the extension due date set
forth in Schedule A. Lender agrees, however, that the maturity date of the Note shall
extended to be the close of business on the earlier of: (i) date the Company closes on the
IPO (the “IPO Closing Date”), or (ii) September 30, 2006.
(b) Conversion Price. On the IPO Closing Date the Principal Indebtedness on the Note shall,
without any further action by Lender or the Company, be converted into shares of the
Company’s common stock at a conversion price per share (the “Conversion
Price”) equal to 80% of the initial public offering price of the Company’s common stock in
the IPO.
(c) Conversion of Interest. The Company shall give written notice to Lender within five (5)
days after filing a Registration Statement with the Securities and Exchange Commission
relating to the IPO. As soon as practicable after filing such Registration Statement, the
Company shall also furnish Lender with a copy of the prospectus which is a part thereof.
Lender shall have the option, within ten (10) days after receipt of the Company’s notice of
filing the Registration Statement, to notify the Company in writing that Lender desires to
convert the Company’s accrued interest and penalty due Lender as of the IPO Closing Date
into common stock. If the Company receives such notice, accrued interest and penalty on the
Principal Indebtedness shall be automatically converted into common stock in the same manner
as the Principal Indebtedness is converted.
(d) Deferral of Payments. Payment of all Principal Indebtedness due prior to September 30,
2006, and of all accrued interest due on the Note shall be deferred until the earlier of the
IPO Closing Date or September 30, 2006. The Principal Indebtedness shall continue to accrue
interest from and after February 11, 2006, the original maturity date of the Note, but the
penalty amount payable to Lender shall be a one-time payment and shall not bear interest.
If the Company does not complete an IPO by September 30, 2006, all principal, accrued
interest and the penalty due on the Note shall be due and payable on October 1, 2006.
(e) Preferred Stock. The Note is convertible only into the common stock of the Company.
The forgoing supersedes all prior understandings of the Company and Lender concerning the
issuance of preferred shares of the Company.
4. Conversion Procedure. Upon conversion of the Principal Indebtedness, or accrued interest and
penalty on the Principal Indebtedness (if Lender elects to convert the same as provided in Section
2(d)), Lender shall surrender to the Company the original Note at the principal office of the
Company, duly endorsed. As promptly as possible thereafter, and in no event later than ten (10)
days after the Company’s receipt of the Note, the Company shall issue and deliver to Lender stock
certificates representing the number of shares of common stock into which the indebtedness
evidenced by the Note has been converted. In the event conversion of the Note would result in the
issuance of a fractional share of common stock, the Company shall make to Lender a cash payment of
a fractional share based upon the Conversion Price.
5. Securities Exemption; Investment Intent. Lender represents that Lender is an “accredited
investor” as that term is defined in Section 501 of Regulation D under the Securities Act of 1933,
as amended. Lender understands that neither this Note nor the securities issuable upon conversion
of the Note have been registered under the Securities Act of 1933, as amended (the “Act”), or
applicable state securities laws. Lender has acquired the Note for investment and not with a view
to distribution or resale. Other than pursuant to registration under the Act and any applicable
state securities laws or an exemption from registration, the availability of which the Company
shall determine in its sole discretion, the Note and the shares of common stock into which the Note
may be converted may not be sold, pledged, assigned or otherwise disposed of
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(whether voluntarily or involuntarily) by holder. Lender agrees cause any transferee of the Note
or the shares of common stock subject to the Note to be bound by the terms and provisions of this
Agreement.
6. Disclosure. Lender is familiar with the Company’s business and financial condition and has had
an opportunity to obtain, and has received, additional information concerning the Company and has
an opportunity to ask questions of, and receive answers from, the Company, to the extent deemed
necessary by Lender in order to make a decision concerning Lender’s agreement to be a party to this
Agreement. Lender understands that the Company is in an early stage and that the purchase of its
shares involves a high degree of risk, including the risk of receiving no return on Lender’s
investment and of the losing of Lender’s entire investment in the Company. Lender is able to bear
the economic risk of investment in the Note and any shares acquired upon conversion of the Note.
Lender is aware that there is not currently any market for the Note or the Company’s common stock,
and there is no assurance that a public market for the Company’s common stock will develop. Lender
believes that investment in the shares acquired upon conversion of the Note, and any additional
shares received upon conversion of accrued interest on the Note, meets Lender’s investment
objectives and financial needs, and Lender has adequate means of providing for Lender’s current
financial needs and contingencies, and has no need for liquidity of investment with respect to
common stock acquired upon conversion of the Note.
7. Registration Rights. Under the terms of sale of the Bridge Notes, the Company has agreed to
file a registration statement with the Securities and Exchange Commission within sixty (60) days
following the IPO Closing Date to permit the resale of shares acquired by Purchasers of Bridge
Notes (the “Resale Registration Statement”). The Company agrees to include shares of common stock
purchasable by Lender upon conversion of the Note or interest thereon in the Resale Registration
Statement, on the same terms as the Purchasers of the Bridge Notes. In addition, the Company
agrees to include in such registration, any shares of common stock purchasable by Lender pursuant
to any other warrants issued by the Company to Lender prior to the date of this Agreement. The
Company will notify Lender when it intends to file a registration statement following the IPO
closing date. If the Company does not file a Resale Registration Statement within such 60-day
period, Lender shall have the right to require that the Company file the Resale Registration
Statement within ninety (90) days following the IPO Closing Date, and the Company will use
commercially reasonable efforts to cause such Resale Registration Statement to be declared
effective within 120 days following the closing date of the IPO. At the time of filing such
registration statement, the Company shall enter into a further agreement with the Lender having
customary representations, indemnities, opinions of counsel and such other provisions as Lender may
reasonably request.
8. Lock-Up. If the Company enters into an underwriting agreement with an underwriter for an
initial public offering and completes such offering prior to September 30, 2006, Lender will enter
into a “lock-up” agreement with such underwriter which shall provide that Lender will not sell or
dispose, or agree to sell or dispose, of any shares of common stock of the Company for a period of
180 days following the closing of the public offering or, if Lender is an officer, director,
employee or ten percent or more beneficial owner of the Company’s common stock, or is an entity
controlled by any of such persons, 12 months from the date of closing such public offering.
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9. Effect of Amendments and Allonge. Except for the foregoing amendments set forth in Sections 2,
3 and 4, the terms and conditions of the Note not inconsistent therewith shall remain in full force
and effect. Lender shall attach and permanently affix this Agreement as an allonge to the Note and
give notice and a copy of this Agreement to any transferee or pledgee of the Note.
10. Notices. To be effective, all notices, elections or other communications and deliveries
required or permitted hereunder shall be in writing. A written notice or other communication or
delivery shall be deemed to have been given or made hereunder (i) if delivered by hand, when the
notifying party delivers such notice or other communication to Lender or the Company, as the case
may be, or (ii) if delivered by a nationally known overnight delivery service (such as Fed Ex, UPS
or DHL), on the first business day following the date such notice or other communication or
delivery is timely delivered to the overnight courier. Communications or deliveries shall be
directed to the addresses of the Company or Lender, as applicable, at the addresses set forth below
(or such other address as Lender shall designate in writing from time to time).
11. Governing Law. This Agreement shall be governed by the laws of the State of Minnesota
applicable to contracts made and to be performed wholly within Minnesota, without giving effect to
conflicts of laws principles. Venue for enforcement of this Agreement shall be in any federal
court or Minnesota state court sitting in Minneapolis, Minnesota. Lender and the Company consent
to the jurisdiction and venue of any such court and waives any argument that the venue in such
forums is not convenient.
12. Successors or Assigns. The Company and Lender agree that all of the terms of this Agreement
shall be binding on their respective successors and assigns, and that the term “Company” and the
term “Lender” as used herein shall be deemed to include, for all purposes, the respective
designees, successors, assigns, heirs, executors and administrators.
13. Invalidity of Particular Provisions. The Company and Lender agree that the unenforceability or
invalidity of any provision or provisions of this Note shall not render any other provision or
provisions herein contained unenforceable or invalid.
14. Confidentiality. The information contained in this Agreement relative to the Company’s
proposed bridge debt financing and public offering are highly confidential. Lender agrees that all
discussions with the Company relative to the foregoing financing will be held in the strictest of
confidence and will not be disclosed without the consent of the Company, or as required by law.
Such confidentiality restriction shall continue until the Company advises Lender that it no longer
intends to pursue a public offering, or the Company’s public disclosure of the proposed public
offering. Lender has been advised that a breach of this disclosure obligation may jeopardize the
Company’s proposed financing. Lender may disclose the terms of this Agreement to any attorney or
other advisor of Lender who agrees in writing to be bound by these confidentiality terms.
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IN WITNESS WHEREOF, the Company and Lender have executed this Agreement effective the 9th day
of March, 2006.
| WIRELESS RONIN TECHNOLOGIES, INC. | |||||||
| By | /s/ Xxxxxxx X. Xxxx
|
||||||
| Xxxxxxx X. Xxxx | |||||||
| President and Chief Executive Officer | |||||||
| 00000 Xxxxxx Xxxxx | |||||||
| Xxxx Xxxxxxx, XX 00000 | |||||||
| SHAG LLC | |||||||
| By | /s/ Xxx X. Xxxxx | ||||||
| Partner | |||||||
| Signature and Title | |||||||
| Address: | |||||||
| 0000 Xxxxxx Xxxxxx | |||||||
| Xxxxxx, XX 00000 | |||||||
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SCHEDULE A
| Accrued Interest and | ||||||||
| Principal | Penalty as of | |||||||
| Date of Note | Amount | February 11, 2006 | ||||||
November 11, 2005 |
$ | 100,000.00 | $ | 7,500.00 | ||||
