EXHIBIT 4.2
THIS NOTE, THE SHARES OF COMMON STOCK AND THE COMMON STOCK PURCHASE WARRANTS
ISSUABLE UPON CONVERSION OF THIS NOTE (COLLECTIVELY, THE "SECURITIES") HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY. THE SECURITIES ARE
BEING OFFERED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
FEDERAL AND STATE SECURITIES LAW AND CANNOT BE RESOLD UNLESS THEY ARE
SUBSEQUENTLY REGISTERED UNDER SUCH LAWS OR UNLESS EXEMPTIONS FROM REGISTRATION
ARE AVAILABLE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
GOVERNMENTAL AGENCY HAS PASSED ON, RECOMMENDED, OR ENDORSED THE MERITS OF THE
SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
CONVERTIBLE
PROMISSORY NOTE
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$DOLLAR AMOUNT January 1, 1999
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY, netValue
Holdings, Inc., a Delaware corporation having its principal executive office at
Two Penn Center ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter referred
to, and obligated as, "Borrower"), promises to pay to the order of NAME
("Lender"), the principal sum of WRITTEN AMOUNT Dollars, together with interest
as set forth below, until the date on which the principal amount is paid in
full, payable in lawful money of the United States of America in accordance with
the terms of this Promissory Note (the "Note").
1. Maturity Date. The Note shall have a maturity date (the "Maturity
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Date") of the earlier of (i) the date on which the Lender elects to convert all
of the outstanding and unpaid principal and accrued interest of this Note into
shares of the Borrower's common stock, par value $.001 per share ("Common
Stock") pursuant to Paragraph 5(a) hereof; (ii) the date on which the Borrower
elects to cause a Mandatory Conversion of all of the outstanding and unpaid
principal and accrued interest of this Note into shares of the Borrower's Common
Stock pursuant to Paragraph 5(b) hereof; or (iii) the one-year anniversary of
the closing of the merger of Borrower and netValue, Inc. (the "Merger").
2. Interest.
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(a) During the period beginning on the date hereof and ending on the
Maturity Date, interest shall accrue daily on the outstanding principal amount
hereunder at a simple rate of twelve percent (12%) per annum.
(b) Interest shall be calculated hereunder for the actual number of
days that the principal is outstanding, based on a three hundred sixty (360) day
year. Interest shall continue to accrue on the principal balance hereof at the
then-applicable simple rate of interest specified in this Note,
notwithstanding any demand for payment, acceleration and/or the entry of any
judgment against ▇▇▇▇▇▇▇▇, until all principal owing hereunder is paid in full
or converted into shares of Common Stock.
3. Payment. No payments of principal or accrued interest shall be due
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on the Note until the Maturity Date. Accrued interest shall be paid in shares of
Common Stock of Borrower at the Conversion Price upon any conversion of the Note
into shares of Borrower's Common Stock pursuant to Paragraph 5 hereof. All
accrued and unpaid interest shall be paid in cash upon the one-year anniversary
of the closing of the Merger if no conversion shall occur.
4. Prepayments. The Borrower reserves the right to prepay any or all
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of the principal balance due on the Note at any time prior to the Maturity Date.
5. Conversion Rights.
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(a) Conversion at the Option of Lender.
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(i) Lender may, at any time and from time to time, convert
(an "Optional Conversion") all or any part of the outstanding principal amount
of the Note, plus all accrued interest thereon through the date of conversion,
into a number of fully paid and nonassessable shares of Common Stock of Borrower
equal to the quotient of the total amount of principal and accrued interest
which ▇▇▇▇▇▇ has elected to convert divided by the conversion price in effect at
such time (the "Conversion Price"). The initial Conversion Price shall be $2.00.
(ii) In order to effect an Optional Conversion, Lender shall:
(x) fax (or otherwise deliver) a copy of the fully executed Notice of Conversion
to Borrower for the Common Stock and (y) surrender or cause to be surrendered,
the Note duly endorsed, along with a copy of the Notice of Conversion as soon as
practicable thereafter, to Borrower. Upon receipt by ▇▇▇▇▇▇▇▇ of a facsimile
copy of a Notice of Conversion from Lender, Borrower shall immediately send, via
facsimile, a confirmation to Lender stating that the Notice of Conversion has
been received, the date upon which Borrower expects to deliver the Common Stock
issuable upon such Optional Conversion and the name and telephone number of a
contact person at Borrower regarding the Optional Conversion. Borrower shall not
be obligated to issue shares of Common Stock issuable upon such Optional
Conversion unless either the Note is delivered to Borrower as provided above, or
Lender notifies Borrower that the Note has been lost, stolen or destroyed and
Lender complies with such reasonable requirements of Borrower as are necessary
to assure Borrower of such loss, theft or destruction.
(iii) Upon the surrender of the Note and a Notice of
Conversion, Borrower shall issue and deliver to Lender (x) that number of shares
of Common Stock issuable upon such Optional Conversion of the portion of the
Note being converted, (y) that number of Common Stock Purchase Warrants issuable
in accordance with Section 5(c), and (z) a new note in substantially the same
form as the Note representing the balance of the principal amount of the Note
not being converted, if any.
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(b) Mandatory Conversion at the Election of ▇▇▇▇▇▇▇▇.
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(i) Borrower may cause all, but not less than all, of the
outstanding principal amount of the Note, plus all accrued interest thereon
through the date of conversion, to be converted into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of the total amount
of principal and accrued interest thereon through the date of conversion divided
by the Conversion Price (a "Mandatory Conversion") upon the occurrence of any
one of the following events:
1) If (i) Borrower's Common Stock is listed on the
NASDAQ Over-the-Counter Bulletin Board Trading System
(the "Bulletin Board"), (ii) the average of the "bid"
and "ask" price on the Bulletin Board is at least
$5.00 per share for a period of at least twenty (20)
consecutive trading days immediately preceding the
date of conversion and (iii) the shares of Common
Stock issuable upon conversion of the Note have been
registered for resale with the Securities and
Exchange Commission (the "SEC"); or
2) If (i) Borrower's Common Stock is traded on any
national exchange or market (other than the Bulletin
Board), (ii) the average closing price on such
exchange or market is at least $5.00 per share for a
period of at least twenty (20) consecutive trading
days immediately preceding the date of conversion and
(iii) the shares of Common Stock issuable upon
conversion of the Note have been registered for
resale with the SEC.
(ii) In order to effect a Mandatory Conversion, Borrower shall:
fax (or otherwise deliver) a copy of the fully executed Notice of Conversion to
Lender. Within three (3) business days of receipt by Lender of such Notice of
Conversion from Borrower, Lender shall cause the Note, duly endorsed, to be
surrendered to ▇▇▇▇▇▇▇▇. In the event the Note is not surrendered to Borrower
within three (3) business days following the receipt by Lender of a Notice of
Conversion from Borrower, the Note shall for all purposes be deemed canceled and
shall no longer constitute an obligation of Borrower, except for Borrower's
obligation to deliver shares of Common Stock and Common Stock Purchase Warrants
in accordance with Sections 5(b)(iii) and 5(c) hereof.
(iii) Borrower shall not be obligated to issue shares of Common
Stock or Common Stock Purchase Warrants issuable upon a Mandatory Conversion
unless either the Note is delivered to Borrower as provided above, or Lender
notifies Borrower that the Note has been lost, stolen or destroyed and Lender
complies with such reasonable requirements of Borrower as are necessary to
assure Borrower of such loss, theft or destruction. Upon the surrender of the
Note, ▇▇▇▇▇▇▇▇ shall issue and deliver to Lender that number of shares of Common
Stock and that number of Common Stock Purchase Warrants issuable upon such
Mandatory Conversion.
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(c) Issuance of Common Stock Purchase Warrant. Borrower shall issue
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to Lender a Common Stock Purchase Warrant (the "Common Stock Purchase Warrant")
to purchase one-half of one share of Common Stock of Borrower for each share of
Common Stock of Borrower issued to Lender upon any Optional Conversion or
Mandatory Conversion. The Common Stock Purchase Warrant shall be exercisable
for a period of three years from the date of issuance at an exercise price of
$6.00 per share of Common Stock and shall have the other terms and conditions
and be in the form attached at Exhibit "A" hereto.
(d) Taxes. Borrower shall pay any and all taxes (other than transfer
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taxes) which may be imposed upon it with respect to the issuance and delivery of
the shares of Common Stock upon any Conversion.
(e) No Fractional Shares. If any Conversion would result in the
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issuance of a fractional share of Common Stock such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon such
Conversion shall be the nearest whole number of shares.
(f) Adjustments to the Conversion Price. The Conversion Price shall
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be subject to adjustment from time to time as follows:
(i) If at any time on or after the date of issuance of the
Note, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, combination, reclassification or other similar event, the
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, Borrower
shall notify ▇▇▇▇▇▇▇▇'s transfer agent of such change on or before the effective
date thereof.
(ii) If, at any time there shall be (i) any reclassification or
change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation or merger
of Borrower with any other entity (other than a merger in which Borrower is the
surviving or continuing entity and its capital stock is unchanged), (iii) any
sale or transfer of all or substantially all of the assets of Borrower or (iv)
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property, then Lender shall
thereafter have the right to receive upon conversion, in lieu of the shares of
Common Stock immediately theretofore issuable, such shares of stock, securities
and/or other property as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore issuable upon
Conversion had such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event not taken place, and in any such case,
appropriate provisions shall be made with respect to the rights and interests of
Lender to the end that the provisions hereof shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the conversion thereof.
(iii) If Borrower shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of all shares of Common
Stock as a partial liquidating dividend,
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by way of return of capital or otherwise (a "Distribution"), then Lender shall
be entitled, upon any Conversion after the date of record for determining
shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to Lender with respect to the shares of Common
Stock issuable upon such Conversion had Lender been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such Distribution.
(iv) Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Section 5(e), Borrower, at its expense,
shall promptly compute such adjustment or readjustment and prepare and furnish
to Lender a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
(g) Restrictions on Transfer of Shares of Common Stock and Common
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Stock Purchase Warrants.
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(i) Lender understands that the shares of Common Stock and the
Common Stock Purchase Warrants have not been and are not being registered under
the Securities Act of 1933, as amended (the "Securities Act") or any state
securities laws, and may not transferred unless (a) subsequently registered
thereunder, (b) Lender shall have delivered to Borrower an opinion of counsel
(which opinion shall be in form, substance and scope reasonably acceptable to
Borrower) to the effect that the shares of the Common Stock and the Common Stock
Purchase Warrants to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (c) sold pursuant to Rule 144
promulgated under the Securities Act.
(ii) Lender hereby acknowledges and agrees that the shares of
Common Stock and the Common Stock Purchase Warrants shall be subject to any
additional customary restrictions on their sale, transfer or exchange as are
reasonably requested to be imposed on Lender by ▇▇▇▇▇▇▇▇'s underwriter in
connection with an initial public offering of ▇▇▇▇▇▇▇▇'s shares of Common Stock.
(iii) Lender understands that the certificates for the shares of
Common Stock and the Common Stock Purchase Warrants will bear a restrictive
legend setting forth such restrictions on transfer.
6. Ranking. The Notes will be subordinated to all present and future
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indebtedness of the Borrower ranking by its terms senior to the Note.
7. Security. The Notes will be unsecured obligations of Borrower.
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8. ▇▇▇▇▇▇'s Rights Upon Default.
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Each of the following events shall constitute an "Event of Default" and,
upon the occurrence thereof, Lender shall have the option, without the necessity
of giving any prior written notice to ▇▇▇▇▇▇▇▇, (1) to accelerate the maturity
of this Note and all amounts payable hereunder and demand immediate payment
thereof and (2) to exercise all of Lender's rights and remedies under this Note
or otherwise available at law or in equity:
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(a) Borrower shall fail to pay the principal amount of the Note or
accrued interest thereon on the Maturity Date;
(b) Borrower shall fail to issue shares of Common Stock or Common
Stock Purchase Warrants within thirty (30) days of any Optional Conversion or
Mandatory Conversion and Lender shall not be in default of any of its
obligations in connection therewith;
(c) Borrower shall admit an inability to pay its debts as they mature,
or shall make a general assignment for the benefit of any of its or their
creditors;
(d) Proceedings in bankruptcy, or for reorganization of Borrower for
the readjustment of any of its or their debts, under the United States
Bankruptcy Code, as amended, or any part thereof, or under any other laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced by Borrower or shall be commenced against Borrower and shall
not be dismissed within sixty (60) days of their commencement;
(e) A receiver or trustee shall be appointed for Borrower or for any
substantial part of its assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of Borrower, and if such
appointment or proceedings are involuntary, such receiver or trustee shall not
be discharged within sixty (60) days of appointment, or such proceedings shall
not be discharged within sixty (60) days of their commencement, or Borrower
shall discontinue its business(es) or materially change the nature of its
business(es);
(f) Borrower shall suffer any final judgment for the payment of money
in excess of Five Hundred Thousand Dollars ($500,000) and the same shall not be
discharged or stayed within a period of thirty (30) days from the date of entry
thereof.
9. Application of Funds. All sums realized by ▇▇▇▇▇▇ on account of this
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Note, from whatever source received, shall be applied first to any fees, costs
and expenses (including attorney's fees) incurred by ▇▇▇▇▇▇, second to accrued
and unpaid interest, and then to principal.
10. Attorney's Fees and Costs. In the event that Lender engages an
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attorney to represent it in connection with (a) any default by Borrower under
this Note, (b) the enforcement of any of Lender's rights and remedies hereunder,
(c) any bankruptcy or other insolvency proceedings commenced by or against
Borrower and/or (d) any actual litigation arising out of or related to any of
the foregoing, then Borrower shall be liable to and shall reimburse Lender on
demand for all reasonable attorneys' fees, costs and expenses incurred by ▇▇▇▇▇▇
in connection with any of the foregoing provided a final and unappealable
judgment in favor of ▇▇▇▇▇▇ has been issued in connection therewith.
11. Governing Law. This Note is made and delivered in the State of
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Delaware and shall be construed and enforced in accordance with and governed by
the internal laws of the State of Delaware without regard to conflicts of laws
principles. ▇▇▇▇▇▇▇▇ agrees to the exclusive jurisdiction of the federal and
state courts located in the State of Delaware in connection with any matter
arising hereunder, including the collection and enforcement of this Note.
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12. Miscellaneous.
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(a) Borrower hereby waives protest, notice of protest, presentment,
dishonor, notice of dishonor and demand. To the extent permitted by law,
Borrower hereby waives and releases all errors, defects and imperfections in any
proceedings instituted by ▇▇▇▇▇▇ under the terms of this Note.
(b) Notwithstanding anything to the contrary contained herein, if the
Merger has not been consummated prior to December 31, 2001, then Lender shall
have the right to demand payment of the principal amount of this Note and all
accrued interest thereon.
(c) The rights and privileges of Lender under this Note shall inure to
the benefit of its successors and assigns. All representations, warranties and
agreements of Borrower made in connection with this Note shall bind ▇▇▇▇▇▇▇▇'s
successors and assigns.
(d) If any provision of this Note shall for any reason be held to be
invalid or unen forceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Note shall be construed as if such invalid
or unenforceable provision had never been contained herein.
(e) The waiver of any Event of Default or the failure of Lender to
exercise any right or remedy to which it may be entitled shall not be deemed to
be a waiver of any subsequent Event of Default or of ▇▇▇▇▇▇'s or ▇▇▇▇▇▇'s right
to exercise that or any other right or remedy to which ▇▇▇▇▇▇ is entitled.
(f) The rights and remedies of Lender under this Note shall be in
addition to any other rights and remedies available to Lender at law or in
equity, all of which may be exercised singly or concurrently.
(g) Lender shall have the right, without the prior consent of
▇▇▇▇▇▇▇▇, to assign all of ▇▇▇▇▇▇'s rights and obligations hereunder.
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has duly executed this Promissory Note the day
and year first above written and has hereunto set hand and seal.
NETVALUE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
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NOTICE OF CONVERSION
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Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in a Convertible
Promissory Note made by netValue Holdings, Inc. dated _____________ (the
"Note"), hereby agrees to convert the principal and accrued interest in the
amount of $___________ under the Note into shares of netValue Holdings, Inc.
common stock, par value $.001 per share, at the conversion price set forth in
the Note. Please issue a certificate or certificates for such shares of Common
Stock to:
Name:_________________________________
Signature:____________________________
Address:______________________________
______________________________
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
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