SECURED CONVERTIBLE TERM NOTE
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO a21, INC. AND SUPERSTOCK, INC., THAT SUCH REGISTRATION IS NOT
REQUIRED.
FOR
VALUE
RECEIVED, a21, Inc., a Texas corporation (“a21”)
and
Superstock, Inc., a Florida corporation (“Superstock”
and
together with a21, each a “Company”
and
collectively, the “Companies”),
jointly, severally and unconditionally promise to pay to _______________,
_______________, Fax: ___________ (the “Holder”)
or its
registered assigns or successors in interest, the sum of __________ Dollars
($_______), together with any accrued and unpaid interest hereon, on March
31,
2011 (the “Maturity
Date”)
if not
sooner paid.
This
Secured Convertible Term Note (the “Note”)
is
intended to be a registered obligation within the meaning of Treasury Regulation
Section 1.871-14(c)(1)(i) and the Companies (or their agent) shall register
the
Note (and thereafter shall maintain such registration) as to both principal
and
any stated interest. Notwithstanding any document, instrument or agreement
relating to this Note to the contrary, transfer of this Note (or the right
to
any payments of principal or stated interest thereunder) may only be effected
by
(i) surrender of this Note and either the reissuance by the Companies of
this
Note to the new holder or the issuance by the Companies of a new instrument
to
the new holder, or (ii) transfer through a book entry system maintained by
the
Companies (or their agent), within the meaning of Treasury Regulation Section
1.871-14(c)(1)(i)(B).
Capitalized
terms used herein without definition shall have the meanings ascribed to
such
terms in that certain Securities Purchase Agreement dated as of the date
hereof
by and among the Companies, the Holder, the holders of the other Notes (as
defined therein) (together with the Holder, collectively, the “Holders”)
and
Queequeg Partners, L.P., as agent for such Holders (in such capacity the
“Agent”)
(as
amended, modified and/or supplemented from time to time, the “Purchase
Agreement”).
This
Note is subject to the terms and conditions of, and entitled to the benefits
of,
the provisions of the Purchase Agreement (including, but not limited to,
the
covenants set forth in Section 6 of the Purchase Agreement).
This
Note
is one of a series of Notes of like tenor in an aggregate principal amount
of up
to Fifteen Million Five Hundred Thousand Dollars ($15,500,000) issued by
the
Company pursuant to the terms of the Purchase Agreement.
The
following terms shall apply to this Note:
ARTICLE
I
CONTRACT
RATE AND AMORTIZATION
1.1 Contract
Rate.
Subject
to Section 1.3, interest payable on the outstanding principal amount of this
Note (the “Principal
Amount”)
shall
accrue at a rate per annum equal to five percent (5.0%) per annum (the
“Contract
Rate”).
Interest shall be (i) calculated on the basis of a 365 day year, and (ii)
payable quarterly, in arrears, commencing on July 1, 2006, on the first business
day of each consecutive calendar quarter thereafter through and including
the
Maturity Date, and on the maturity of this Note , whether by acceleration
or
otherwise.
1.2 Principal
Payments.
The
aggregate principal amount outstanding under this Note at any time (the
“Principal
Amount”)
shall
be made by the Companies on the Maturity Date.
1.3 Contract
Rate Adjustment.
a21
shall use its commercially reasonable efforts (including the filing of any
necessary documentation with the Securities and Exchange Commission
(“SEC”)
and
applicable state authorities) to obtain the written authorization of a majority
of its shareholders (the “Approval”)
to
increase the number of its authorized shares (the “Share
Increase”)
to
allow for the full conversion of the Notes into Common Stock. If the Approval
is
not obtained prior to July 30, 2006, so long as the Holders who are shareholders
of a21 (as of the record date for voting on the Share Increase) shall have
delivered to a21 the necessary written authorization to vote all of their
shares
of a21 for the Share Increase, the Contract Rate shall be increased by one
percent (1.0%) per annum on July 30, 2006 and on the 30th
day of
each calendar month thereafter, up to a maximum of fifteen percent (15.0%)
per
annum, until the Approval is obtained. Immediately upon obtaining the Approval,
the Contract Rate shall be decreased to five percent (5.0%) per
annum.
1.4 Payments
in Cash.
Except
as provided herein, all payments of principal and interest by each Company
under
this Note shall be made in United States Dollars in immediately available
funds
to an account specified by the Holder.
1.5 Default
Rate.
In the
event that any amount due hereunder is not paid when due, such overdue amount
shall bear interest at an annual rate of fifteen percent (15.0%) until paid
in
full.
1.6 Maximum
Permitted Rate.
In no
event shall any interest charged, collected or reserved under this Note exceed
the maximum rate then permitted by applicable law and if any such payment
is
paid by the Company, then such excess sum shall be credited by the Holder
as a
payment of principal.
ARTICLE
II
CONVERSION
AND REDEMPTION
2.1 Optional
Redemption in Cash.
(a) Subject
to the terms set forth in Section
2.1(b)
below,
with the prior written consent of either (i) the Holder or (ii) the holders
of
Notes representing at least a seventy percent (70%) of the aggregate principal
amount of the Notes then outstanding (the “Required
Holders”),
the
Companies may prepay this Note (“Optional
Redemption”)
by
paying to the Holder the Principal Amount outstanding at such time together
with
accrued but unpaid interest thereon and any and all other sums due, accrued
or
payable to the Holder arising under this Note, the Purchase Agreement or
any
other Related Agreement.
(b) Notwithstanding
the terms set forth in Section
2.1(a)
above,
prior to the Companies effecting an Optional Redemption, the Companies must
give, by delivery in person or by certified or registered mail, return receipt
requested, addressed to the Holder at the address of such Holder as shown
on the
books of the Company, at least ten (10) business days’ prior written notice of
the date on which such Optional Redemption shall take place. The Holder shall
have the option, at any time prior to the date of the Optional Redemption,
to
convert all or any portion of the issued and outstanding Principal Amount
and/or
accrued interest and fees due and payable into fully paid and nonassessable
shares of Common Stock at the Fixed Conversion Price in accordance with the
terms set forth in Article III.
ARTICLE
III
HOLDER’S
CONVERSION RIGHTS
3.1 Optional
Conversion.
Subject
to the terms set forth in this Article III, the Holder shall have the right,
but
not the obligation, prior to the Maturity Date, to convert, at any time and
from
time to time, all or any portion of the issued and outstanding Principal
Amount
and/or accrued interest and fees due and payable into fully paid and
nonassessable shares of Common Stock at the then applicable Fixed Conversion
Price. The initial Fixed Conversion Price shall be $0.65 per share of Common
Stock (the “Fixed
Conversion Price”),
subject to adjustment as set forth in this Article III. The shares of Common
Stock to be issued upon such conversion are herein referred to as, the
“Conversion
Shares.”
3.2 Mechanics
of ▇▇▇▇▇▇’s Conversion.
(a) In
the
event that the Holder elects to convert this Note into Common Stock, the
Holder
shall give notice of such election by delivering an executed and completed
notice of conversion in substantially the form of Exhibit A hereto (appropriate
completed) (“Notice
of Conversion”)
to a21
and such Notice of Conversion shall provide a breakdown in reasonable detail
of
the Principal Amount and accrued interest that are being converted. No
conversion shall be for less than $250,000 or the remaining balance of the
Note.
On each Conversion Date (as hereinafter defined) and in accordance with its
Notice of Conversion, the Holder shall make the appropriate reduction to
the
Principal Amount, accrued interest and fees as entered in its records and
shall
provide written notice thereof to a21 within two (2) business days after
the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to a21 in accordance with the provisions hereof shall be deemed
a
Conversion Date (the “Conversion
Date”).
Pursuant to the terms of the Notice of Conversion, a21 will issue instructions
to the transfer agent and, to the extent required, accompanied by an opinion
of
counsel within three (3) business days of the date of the delivery to a21
of the
Notice of Conversion and shall or shall cause the transfer agent to either
(i)
transmit or (ii) permit the Holder to directly obtain the certificates
representing the Conversion Shares to the Holder within three (3) business
days
after receipt by a21 of the Notice of Conversion (the “Delivery
Date”).
In
the case of the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been issued
upon
the date of receipt by a21 of the Notice of Conversion. The Holder shall
be
treated for all purposes as the record holder of the Conversion Shares, unless
the Holder provides a21 written instructions to the contrary. The issuance
of
certificates for shares of Common Stock upon conversion of this Note shall
be
made without charge to the Holder thereof for any issuance tax in respect
thereof, provided that a21 shall not be required to pay any tax which may
be
payable in respect of any transfer involved in the issuance and delivery
of any
certificate in a name other than that of the Holder. a21 will not at any
time
close its transfer books against the transfer, as applicable, of this Note
or of
any shares of Common Stock issued or issuable upon the conversion of this
Note
in any manner which interferes with the timely conversion of this Note, except
as may otherwise be required to comply with applicable securities
laws.
(b) If
the
Company shall fail to cause the transfer agent to either (x) transmit or
(y)
permit the Holder to directly obtain, a certificate to the Holder for the
number
of Conversion Shares to which the Holder is entitled upon conversion on or
prior
to any Delivery Date (a “Conversion
Failure”)
pursuant to Section 3.2(a) (so long as such Conversion Failure is not a direct
result of such Holder’s action or failure to act), then to the extent permitted
under applicable law, such Purchaser shall be entitled to engage in “short
sales” with respect to the number of Conversion Shares requested to be issued
pursuant to this Section 3.2(b).
3.3 Conversion
Mechanics.
The
number of shares of Common Stock to be issued upon each conversion of this
Note
shall be determined by dividing that portion of the principal and interest
to be
converted, if any, by the then applicable Fixed Conversion Price. No fractional
shares of Common Stock shall be issued upon any conversion of this Note into
Common Stock. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this Section 3.3, be delivered upon such
conversion, the Company, in lieu of delivering such fractional share of Common
Stock, shall pay to the Holder an amount in cash equal to the Market Price
of
such fractional share of Common Stock.
3.4 Adjustment
Provisions.
The
Fixed Conversion Price and number and kind of shares or other securities
to be
issued upon conversion determined pursuant to this Note shall be subject
to
adjustment from time to time upon the occurrence of certain events during
the
period that this conversion right remains outstanding, as follows:
(a) Reclassification.
If any
capital reorganization, reclassification of the capital stock of a21,
consolidation or merger of a21 with another corporation in which a21 is not
the
survivor, or sale, transfer or other disposition of all or substantially
all of
a21’s assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, sale, transfer
or
other disposition, lawful and adequate provision shall be made whereby the
Holder shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions herein specified and in lieu of the shares
of
Common Stock immediately theretofore issuable upon conversion of this Note
such
shares of stock, securities or assets as would have been issuable or payable
with respect to or in exchange for a number of shares of Common Stock equal
to
the number of shares of Common Stock immediately theretofore issuable upon
conversion of this Note, had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place,
and
in any such case appropriate provision shall be made with respect to the
rights
and interests of the Holder to the end that the provisions hereof (including,
without limitation, provision for adjustment of the Fixed Conversion Price)
shall thereafter be applicable, as nearly equivalent as may be practicable
in
relation to any shares of stock, securities or assets thereafter deliverable
upon the conversion hereof. a21 shall not effect any such consolidation,
merger,
sale, transfer or other disposition unless prior to or simultaneously with
the
consummation thereof the successor corporation (if other than a21) resulting
from such consolidation or merger, or the corporation purchasing or otherwise
acquiring such assets or other appropriate corporation or entity shall assume
the obligation to deliver to the Holder, at the last address of the Holder
appearing on the books of a21, such shares of stock, securities or assets
as, in
accordance with the foregoing provisions, the Holder may be entitled to purchase
and receive, without regard to any conversion limitation specified in this
Article III, and the other obligations under this Note. The provisions of
this
paragraph (a) shall similarly apply to any successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
(b) Stock
Splits, Combinations; Dividends and Distributions.
If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend or distribution is paid
on
the Common Stock or any preferred stock issued by a21 in shares of Common
Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then the Fixed
Conversion Price in effect immediately prior to the date upon which such
change
shall become effective, shall be adjusted by a21 so that the Holder thereafter
converting this Note shall be entitled to receive the number of shares of
Common
Stock or other capital stock which the Holder would have received if the
Note
had been converted immediately prior to such event upon payment of a Fixed
Conversion Price that has been adjusted to reflect a fair allocation of the
economics of such event to the Holder, without regard to any conversion
limitation specified in this Article III. Such adjustments shall be made
successively whenever any event listed above shall occur.
(c) Intentionally
Omitted.
(d) Adjustments.
An
adjustment to the Fixed Conversion Price shall become effective immediately
after the payment date in the case of each dividend or distribution and
immediately after the effective date of each other event which requires an
adjustment. In the event that, as a result of an adjustment made pursuant
to
this Article III, the Holder shall become entitled to receive any shares
of
capital stock of a21 other than shares of Common Stock, the number of such
other
shares so receivable upon conversion of this Note shall be subject thereafter
to
adjustment from time to time in a manner and on terms as nearly equivalent
as
practicable to the provisions contained in this Note.
(e) Share
Issuances.
Subject
to the provisions of this Section 3.4, if a21 shall at any time prior to
the
conversion or repayment in full of the Principal Amount issue any shares
of
Common Stock or securities convertible into Common Stock to a Person other
than
the Holder (except (i) pursuant to Sections 3.4(a), (b) or (c) above; (ii)
pursuant to options, warrants, or other obligations to issue shares outstanding
on the date hereof; (iii) pursuant to options, warrants, shares or other
obligations to issue shares as consideration for the purchase price in
connection with the acquisition of any person’s or entity’s equity interests or
assets which have been approved by a majority of the independent directors
serving on a21’s Board of Directors; (iv) pursuant to incentives granted by a21
pursuant to plans approved by a21’s Board of Directors; or (v) pursuant to a
joint venture, strategic alliance or comparable agreement which have been
approved by a majority of the independent directors serving on a21's Board
of
Directors) for a consideration per share (the “Offer
Price”)
less
than the Fixed Conversion Price in effect at the time of such issuance, then
subject to the limitations set forth in the next sentence (x) in respect
of any
Follow On Offerings, the Fixed Conversion Price shall be immediately reset
to
the lowest Offer Price of such Following On Offerings and (y) with respect
to
all other offerings, the Fixed Conversion Price shall be immediately reset
pursuant to the formula in the paragraph below. For purposes hereof, the
issuance of any security of the Company convertible into or exercisable or
exchangeable for Common Stock shall result in an adjustment to the Fixed
Conversion Price upon the issuance of such securities; provided, however,
that
notwithstanding anything to the contrary set forth herein, the Fixed Conversion
Price shall in no event, at anytime, be less than $0.50 (as the same may
be
adjusted pursuant to Sections 3.4(a), (b) and (c) above). No Follow On Offerings
shall in any event have an Offer Price of less than $0.50. The Fixed Conversion
Price shall only be adjusted downward.
Other
than with respect to a Follow On Offering, if the Company issues any additional
shares of Common Stock for a consideration per share less than the
then-applicable Fixed Conversion Price pursuant to this Section 3.4 then,
and
thereafter successively upon each such issue, the Fixed Conversion Price
shall
be adjusted by multiplying the then applicable Fixed Conversion Price by
the
following fraction:
|
(AxC)+(BxD)
|
||
|
A
+
B
|
A
= Total
amount of shares issued and outstanding
B
=
Actual shares sold in the offering
C
= Fixed
Conversion Price
D
= Offer
Price
(f) Computation
of Consideration.
For
purposes of any computation respecting consideration received pursuant to
Section 3.4(c) above, the following shall apply:
(i) in
the
case of the issuance of shares of Common Stock for cash, the consideration
shall
be the amount of such cash;
(ii) in
the
case of the issuance of shares of Common Stock for a consideration in whole
or
in part other than cash, the consideration other than cash shall be deemed
to be
the fair market value thereof as determined in good faith by the Board of
Directors of a21 (irrespective of the accounting treatment thereof); and
(iii) upon
any
such exercise, the aggregate consideration received for such securities shall
be
deemed to be the consideration received by a21 for the issuance of such
securities plus the additional minimum consideration, if any, to be received
by
a21 upon the conversion or exchange thereof (the consideration in each case
to
be determined in the same manner as provided in subsections (i) and (ii)
of this
Section 3.4(d)).
(g) Notice
of Events.
In case
at any time:
(i) a21
shall
declare any dividend upon its Common Stock or any other class or series of
capital stock of a21 payable in cash or stock or make any other distribution
to
the holders of its Common Stock or any such other class or series of capital
stock;
(ii) a21
shall
offer for subscription pro rata
to the
holders of its Common Stock or any other class or series of capital stock
of a21
any additional shares of stock of any class or other rights; or
(iii) there
shall be any capital reorganization or reclassification of the capital stock
of
a21, any acquisition or a liquidation, dissolution or winding up of a21;
then,
in any one or more of said cases, a21 shall give, by delivery in person or
by
certified or registered mail, return receipt requested, addressed to the
Holder
at the address of such Holder as shown on the books of a21, (a) at least
10
days’ prior written notice of the date on which the books of a21 shall close or
a record shall be taken for such dividend, distribution or subscription rights
or for determining rights to vote in respect of any event set forth in clauses
(i) and (ii) of this Section 3.4(g) and (b) in the case of any event set
forth
in clause (iii) of this Section 3.4(g), at least 10 days’ prior written notice
of the date when the same shall take place. Such notice in accordance with
the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock or such other class or series of capital stock shall be entitled thereto
and such notice in accordance with the foregoing clause (b) shall also specify
the date on which the holders of Common Stock and such other series or class
of
capital stock shall be entitled to exchange their Common Stock and other
stock
for securities or other property deliverable upon consummation of the applicable
event set forth in clause (iii) of this Section 3.4(g).
(h) Notice
of Adjustment.
Upon
any adjustment of the Fixed Conversion Price, then and in each such case
a21
shall give prompt written notice thereof, by delivery in person or by certified
or registered mail, return receipt requested, addressed to the Holder at
the
address of such Holder as shown on the books of a21, which notice shall state
the Fixed Conversion Price resulting from such adjustment and setting forth
in
reasonable detail the method upon which such calculation is based.
3.5 Reservation
of Shares.
Commencing on the date a21 receives written consent of the requisite number
of
shareholders for the increase of its authorized capital under applicable
law and
a21 has, in accordance with applicable state and securities laws, notified
all
of its shareholders of such increase, but in no event after June 30, 2006,
during the period the conversion right exists, a21 will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Conversion Shares upon the full conversion of this Note.
a21
represents that upon issuance, the Conversion Shares will be duly and validly
issued, fully paid and non-assessable. a21 agrees that its issuance of this
Note
shall constitute full authority to its officers, agents, and transfer agents
who
are charged with the duty of executing and issuing stock certificates to
execute
and issue the necessary certificates for the Conversion Shares upon the
conversion of this Note. Without limiting the generality of the foregoing,
a21
will from time to time take all such commercially reasonable action as may
be
requisite to assure that the par value per share of the Common Stock is at
all
times equal to or less than the Fixed Conversion Price in effect at the time.
a21 shall take all such action as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any applicable
law
or regulation, or of any requirement of any national securities exchange
upon
which the Common Stock may be listed. a21 shall not take any action which
results in any adjustment of the Fixed Conversion Price if the total number
of
shares of Common Stock issued and issuable after such action upon conversion
of
this Note would exceed the total number of shares of Common Stock then
authorized by a21’s Certificate of Incorporation.
3.6 Registration
Rights.
The
Holder has been granted registration rights with respect to the Conversion
Shares as set forth in the Registration Rights Agreement dated as of the
date
hereof.
3.7 Issuance
of New Note.
Upon
any partial conversion of this Note, a new Note containing the same date
and
provisions of this Note shall, at the request of the Holder, be issued by
a21 to
the Holder for the principal balance of this Note and interest which shall
not
have been converted or paid. Subject to the provisions of Article IV of this
Note, a21 shall not pay any costs, fees or any other consideration to the
Holder
for the production and issuance of a new Note.
3.8 Required
Conversion.
In the
event that the forty-five day Volume Weighted Average Price (“VWAP”),
as
defined herein, is greater than or equal to $1.00, subject to adjustment
from
time to time in accordance with the provisions of this Article III, then
a21
may, at its sole option, provide within one (1) business day following the
last
Trading Day used to calculate such VWAP, the Holder irrevocable written notice
(“Call
Notice”)
requiring the conversion at the Fixed Conversion Price of all or a portion
of
the Note held by the Holder with five (5) business days of the date of the
Call
Notice (the “Call
Date”),
provided a registration statement covering resales of that number of Conversion
Shares provided for in the Call Notice has been declared effective and is
available for use by the Holders pursuant to the terms of the Registration
Rights Agreement. For the purposes of this Section 3.8, “VWAP”
means
the weighted average selling price of each trade of the Common Stock on
forty-five consecutive Trading Days, as defined herein, weighted by the number
of shares of Common Stock sold at each such price. “Trading
Day”
shall
mean any day on which the shares of Common Stock are traded on a Principal
Market (as defined in the Purchase Agreement).
ARTICLE
IV
EVENTS
OF DEFAULT
4.1 Events
of Default.
The
occurrence of any of the following events set forth in this Section 4.1 shall
constitute an event of default (“Event
of Default”)
hereunder:
(a) Failure
to Pay.
Any
Company fails to pay when due, whether at maturity, upon acceleration or
otherwise, (i) any installment of principal in accordance herewith, or (ii)
any
installment of interest in accordance herewith or any of the other Obligations
(under and as defined in the Master Security Agreement) and, with respect
to
this clause (ii), such failure shall continue for a period of five (5) days
following the date upon which such payment was due;
(b) Breach
of Covenant.
Any
Company or any of its Subsidiaries breaches any covenant or any other term
or
condition of this Note (other than with respect to an Event of Default set
forth
in this Section 4.1) and such breach continues for a period of twenty (20)
days
after such Company receives from Agent notice of the occurrence
thereof;
(c) Breach
of Representations and Warranties.
Any
representation, warranty or statement made or furnished by, or on behalf
of, any
Company or any of its Subsidiaries in, or in connection with, this Note,
the
Purchase Agreement or any other Related Agreement shall at any time be false
or
misleading in any material respect on the date as of which made or deemed
made,
if that representation or warranty is not by its terms already qualified
as to
materiality;
(d) Default
Under Other Agreements.
The
occurrence of any default (or similar term) in the observance or performance
of
any other agreement or condition relating to any indebtedness of greater
than
$500,000 in aggregate principal amount of any Company or any of its Subsidiaries
beyond the period of grace (if any), if the effect of such default is to
accelerate, or gives the holder or holders of such indebtedness the right
to
accelerate its stated maturity or any such indebtedness becomes
due;
(e) Bankruptcy.
Any
Company or any of its Subsidiaries shall (i) apply for, consent to or
suffer to exist the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part
of
its property, (ii) make a general assignment for the benefit of creditors,
(iii) commence a voluntary case under the federal bankruptcy laws (as now
or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file
a
petition seeking to take advantage of any other law providing for the relief
of
debtors, (vi) acquiesce to, or failure to have dismissed within sixty (60)
days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
(f) Judgments.
Any
judgments, attachments or levies in excess of $300,000 in the aggregate are
made
upon any Company or any of its Subsidiary’s assets or a judgment is rendered
against any Company’s property involving a liability of more than $300,000 which
shall not have been vacated, discharged, stayed or bonded within thirty (30)
days from the entry thereof;
(g) Insolvency.
Any
Company or any of its Subsidiaries shall admit in writing its inability,
or be
generally unable, to pay its debts as they become due or cease operations
of its
present business;
(h) Indictment.
A
felony indictment of any Company or any of its Subsidiaries or any executive
officer of a21 or any of its Subsidiaries under any criminal statute relating
to
fraud or deceit which has a Material Adverse Effect;
(i) The
Purchase Agreement and Related Agreements.
(i) An
Event of Default (as such term is defined in each of the Purchase Agreement
and
any other Related Agreement) shall occur, (ii) any Company or any of its
Subsidiaries shall breach any term or provision of the Purchase Agreement
or any
other Related Agreement in any respect and such breach, if capable of cure,
continues unremedied for a period of twenty (20) days after such breach,
(iii) any Company or any of its Subsidiaries attempts to terminate,
challenges the validity of, or its liability under, the Purchase Agreement
or
any Related Agreement or (iv) the Purchase Agreement or any Related Agreement
ceases to be a valid, binding and enforceable obligation of any Company or
any
of its Subsidiaries (to the extent such persons or entities are a party
thereto);
(j) Stop
Trade.
An SEC
stop trade order or Principal Market trading suspension of the Common Stock
shall be in effect for five (5) consecutive days or five (5) days during
a
period of ten (10) consecutive days, excluding in all cases a suspension
of all
trading on a Principal Market, provided that a21 shall not have been able
to
cure such trading suspension within thirty (30) days of the notice thereof
or
list the Common Stock on another Principal Market within sixty (60) days
of such
notice;
(k) Transfers
or Dispositions of Collateral.
Any
transfer or disposition of Collateral, except in the ordinary course of business
as expressly permitted under the Purchase Agreement or any other Related
Agreement; or
(l) Liens.
Any
liens created by the Master Security Agreement shall at any time not constitute
a valid and perfected first priority lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration, recordation
or possession is required herein or therein) in favor of the Holders, free
and
clear of all other liens (other than Permitted Encumbrances (as defined in
the
Master Security Agreement), or any of the security interests granted pursuant
to
the Master Security Agreement shall be determined to be void, voidable, invalid
or unperfected, are subordinated or are ineffective to provide the Holder
with a
perfected, first priority security interest in the collateral covered by
the
Master Security Agreement, free and clear of all other liens (other than
Permitted Encumbrances) or, except for expiration or termination in accordance
with their terms, the Master Security Agreement shall for whatever reason
be
terminated or cease to be in full force and effect, or the enforceability
thereof or the Purchase Agreement or any other Related Agreement shall be
contested by the Company.
Upon
the
occurrence of any such Event of Default all unpaid principal and accrued
interest under this Note shall become immediately due and payable (A) upon
election of the Required Purchasers (as defined in the Purchase Agreement)
by
notice to the Agent, with respect to (a) through (d) and (f) through (l),
and
(B) automatically, with respect to (e). Upon the occurrence of any Event
of
Default, the Agent, on behalf of the Holders, may, in addition to declaring
all
amounts due hereunder to be immediately due and payable, pursue any available
remedy, whether at law or in equity, including, without limitation, exercising
its rights under the Purchase Agreement and other Related Agreements. If
an
Event of Default occurs, the Company shall pay to the Holders or the Agent,
on
behalf of the Holders, the reasonable attorneys' fees and disbursements and
all
other reasonable out-of-pocket costs incurred by the Agent in order to collect
amounts due and owing under this Note or otherwise to enforce the Holder's
rights and remedies hereunder and under the Purchase Agreement and other
Related
Agreements.
4.2 Limitation
on Holder Remedies.
Anything in the Purchase Agreement or the Related Agreements to the contrary
notwithstanding, ▇▇▇▇▇▇ agrees with each other Holder that to the extent
Agent
or Required Purchasers have the right to take or cause to be taken any action,
course of action or enforcement, no Holder, shall take any such action to
protect or enforce its rights arising out of the Purchase Agreement, the
Notes
or the other Related Agreements (including exercising any rights of setoff)
without first obtaining the prior written consent of Agent and Required
Purchasers, it being the intent of Holders that any such action to protect
or
enforce rights under the Purchase Agreement, the Notes and the other Related
Agreements shall be taken in concert and at the direction or with the consent
of
Agent or Required Purchasers, as applicable.
ARTICLE
V
MISCELLANEOUS
5.1 Conversion
Privileges.
The
conversion privileges set forth in Article III shall remain in full force
and
effect immediately from the date hereof until the date this Note is indefeasibly
paid in full.
5.2 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
5.3 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder hereof or 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 privilege.
All
rights and remedies existing hereunder are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
5.4 Notices.
Any
notice herein required or permitted to be given shall be in writing and shall
be
deemed effectively given: (a) upon personal delivery to the party notified,
(b)
when sent by confirmed telex or facsimile if sent during normal business
hours
of the recipient, if not, then on the next business day, (c) five (5) days
after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (d) one day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification
of
receipt. All communications shall be sent to the Companies at the address
provided in the Purchase Agreement executed in connection herewith, and to
the
Holder at the address provided in the Purchase Agreement for such Holder,
or at
such other address as any Company or the Holder may designate by five (5)
days
advance written notice to the other parties hereto.
5.5 Amendment
Provision.
The
term “Note”
and
all
references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented in
writing and consented to by the Required Purchasers, then as so amended or
supplemented, and any successor instrument as such successor instrument may
be
amended or supplemented.
5.6 Assignability.
This
Note shall be binding upon the Companies and their respective successors
and
assigns, and shall inure to the benefit of the Holder and its successors
and
assigns, and may be assigned by the Holder in accordance with the requirements
of the Purchase Agreement. The Companies may not assign any of their obligations
under this Note without the prior written consent of the Required Purchasers,
any such purported assignment without such consent being null and
void.
5.7 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) EACH
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE
HAND,
AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE
OTHER
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE
OR
ANY OF THE RELATED AGREEMENTS; PROVIDED,
THAT
EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
BE
HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW
YORK.
EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES
ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM
NON CONVENIENS.
(c) EACH
COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS
TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND ANY
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER
RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.
5.8 Severability.
In the
event that any provision of this Note 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 this Note.
5.9 Security
Interest.
Agent,
for the benefit of all Holders, has been granted a security interest (i)
in
certain assets of the Companies as more fully described in the Master Security
Agreement dated as of the date hereof and (ii) in the equity interests of
Superstock UK Ltd. pursuant to the Deed of Charge Over Shares dated as of
the
date hereof. The Master Security Agreement grants the Holder certain rights
with
respect to such collateral upon an Event of Default.
5.10 Construction.
Each
party acknowledges that its legal counsel participated in the preparation
of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.
5.11 Joint
and Several Liability.
Other
than with respect to matters related to the Common Stock, including, without
limitation, the issuance or conversion thereof, and registration rights,
each
Company hereby acknowledges that their financial obligations under this Note,
the Purchase Agreement or any other Related Agreement are joint and
several.
[Balance
of page intentionally left blank; signature page follows]
IN
WITNESS WHEREOF,
each
Company has caused this Secured Convertible Term Note to be signed in its
name
effective as of this ___ day of _________, 2006.
| a21, INC. | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title | ||
| SUPERSTOCK, INC. | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title | ||
EXHIBIT
A
NOTICE
OF CONVERSION
(To
be
executed by the Holder in order to convert all or part of
the
Secured Convertible Term Note into Common Stock)
[Name
and
Address of a21]
The
undersigned hereby converts $_________ of the principal under the Secured
Convertible Term Note dated as of _________, 200__ (the “Note”)
issued
by a21, Inc. (“a21”)
and
Superstock, Inc. by delivery of shares of Common Stock of a21 (“Shares”)
on and
subject to the conditions set forth in the Note.
1. Date
of
Conversion
_______________________
2. Shares
To
Be Delivered:
_______________________
[HOLDER]
By:__________________________________
Name:________________________________
Title:_________________________________