EXHIBIT 10.11
THIS CONVERTIBLE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS IT IS SO
REGISTERED OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
MILITARY RESALE GROUP, INC.
CONVERTIBLE NOTE
Principal Amount: $__________ Dated: ______________
MILITARY RESALE GROUP, INC., a New York corporation (the "Company"),
for value received, hereby promises to pay to ______________, or assigns
("Holder"), on June 30, 2003, the principal amount of
_____________________________ Dollars ($_____) (or so much thereof as shall not
have been prepaid or surrendered for conversion) in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, together with interest (computed on the
basis of 360-day year of twelve 30-day months) on the unpaid portion of the
principal amount hereof at the annual rate of eight percent (8%) from the date
hereof until June 30, 2002 and, thereafter, at the annual rate of nine percent
(9%) until the unpaid portion of such principal amount shall have become due and
payable.
Section 1. DEFINITIONS.
Section 1.01. TERMS DEFINED. The terms defined in this Section
1.01 (except as herein otherwise expressly provided or unless the context
otherwise requires) for all purposes of this Convertible Note shall have the
respective meanings specified in this Section 1.01.
COMMON STOCK. The term "Common Stock" means shares of the
Company's Common Stock, par value $.0001 per share.
COMPANY. The term "Company" means MILITARY RESALE GROUP, INC.,
a New York corporation, and any successor corporation to the Company (including
the corporation surviving any subsequent merger).
CURRENT CONVERSION PRICE. The term "Current Conversion Price"
means the Conversion Price as most recently adjusted pursuant to Section 3.06.
EVENT OF DEFAULT. The term "Event of Default" means any event
specified in Section 2.01, continued for the period of time, if any, and after
the giving of notice, if any, therein designated.
MATURITY. The term "Maturity" when used with respect to this
Convertible Note means the date on which the principal (and premium, if any) of
this Convertible Note becomes due and payable as herein provided, whether at (a)
June 30, 2003, (b) declaration of acceleration or (c) otherwise.
REGISTRATION STATEMENT. The term "Registration Statement"
means a Registration Statement on Form SB-2 filed by the Company with the
Securities and Exchange Commission pursuant to which the shares of Common Stock
issuable upon conversion of this Convertible Note are registered under the
Securities Act.
SECURITIES ACT. The term "Securities Act" means the
Securities Act of 1933, as amended.
Section 2. REMEDIES.
Section 2.01. EVENTS OF DEFAULT. An "Event of Default" occurs
if one or more of the following shall happen (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) if default be made in the punctual payment of the
principal of (or premium, if
any) or interest on this Convertible Note when and as the same shall become due
and payable; or
(b) the Registration Statement is not declared
effective by the Securities and
Exchange Commission on or before June 30, 2003, or such Registration Statement
does not remain effective for at least 90 days; or
(c) the Company, pursuant to or within the meaning of
any Bankruptcy Law: (i)
commences a voluntary case, (ii) consents to the entry of an order for relief
against it in an involuntary case, (iii) to the appointment of a Custodian of it
or for any substantial part of its property, (iv) makes a general assignment for
the benefit of its creditors; or
(d) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that: (i) is for relief against the Company
in an involuntary case, (ii) appoints a Custodian of the Company or for any
substantial part of its property, (iii) orders the liquidation of the Company;
and the order or decree remains unstayed and in effect for 30 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
Section 2.02. REMEDIES. In case any one or more of the Events
of Default specified in Section 2.01 shall have occurred and be continuing, the
Holder of this Convertible Note may proceed to protect and enforce its rights by
suit in equity, action at law or by other appropriate proceedings or both,
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whether for the specific performance of any covenant or agreement contained in
this Convertible Note or in aid of the exercise of any power granted in this
Convertible Note, or may proceed to enforce the payment of this Convertible Note
or to enforce any other legal or equitable right of the Holder of this
Convertible Note.
Section 2.03. REMEDIES CUMULATIVE. No remedy herein conferred
upon the Holder of this Convertible Note is intended to be exclusive of any
other remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
Section 2.04. ENFORCEMENT. If there shall be any Event of
Default under this Convertible Note and this Convertible Note shall be placed in
the hands of an attorney for collection, or shall be collected through any
court, including any bankruptcy court, the Company promises to pay to the order
of the Holder hereof the Holder's reasonable attorneys' fees and court costs
incurred in collecting or attempting to collect or securing or attempting to
secure this Convertible Note or enforcing the holder's rights with respect to
any collateral securing this Convertible Note, to the extent allowed by the laws
of the State of New York or any state in which any collateral for this Note
shall be situated.
Section 3. CONVERSION.
Section 3.01. RIGHT OF CONVERSION, CONVERSION PRICE.
(a) Subject to and upon compliance with the
provisions of this Section 3, at any time following the issuance of this
Convertible Note, the Holder shall have the right, at his option, at any time
during usual business hours to convert the principal and accrued interest of
this Convertible Note owned by the Holder into fully paid and nonassessable
shares of Common Stock that have been registered under the Securities Act
pursuant to the Registration Statement, at the rate of $0.50 of principal for
each share of Common Stock (provided, that the closing price per share of Common
Stock, as reported on the OTC Bulletin Board, on the date of conversion, is at
least $0.75 per share, or if such closing price is less than $0.75 per share, a
proportionate reduction to the $0.50 price, but in no event to a conversion
price that is less than $0.10 per share, so that the Holder will be able to
immediately sell such shares on the OTC Bulletin Board and receive a 50% rate of
return on the principal amount of this Note) (the "Conversion Price"), which
price per share shall be payable by surrender of this Convertible Note.
(b) In the event that the shares of Common Stock
issuable upon conversion of this Note have not been registered under the
Securities Act, on or prior to June 30, 2003, until such time as such shares are
so registered, at the option of the Holder and in lieu of taking any remedial
action in respect of the Event of Default resulting therefrom, the Holder may
convert this Note into a number of shares of Common Stock as is equal to twice
the number of shares of Common Stock as would have been issuable had such shares
been registered under the Securities Act on the date of conversion.
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Section 3.02. MANNER OF EXERCISE.
(a) In order to exercise the conversion right, the
Holder of this Convertible Note shall surrender this Convertible Note at the
office of the Company, accompanied by written notice to the Company stating (i)
that the Holder elects to convert this Convertible Note or, if less than the
entire principal amount of this Convertible Note is to be converted, the portion
thereof (a multiple of $1,000) to be converted, and (ii) the name or names (with
addresses) in which the certificate or certificates for shares of Common Stock
issuable on such conversion shall be issued. Convertible Notes surrendered for
conversion shall be accompanied by proper assignment thereof to the Company or
in blank for transfer if the shares are to be issued in a name other than that
of the Holder.
(b) In the event this Convertible Note which is
converted in part only, upon such conversion the Company shall execute and
deliver to the Holder, at the expense of the Company, a new Convertible Note of
authorized denominations in principal amount equal to the unconverted portion of
this Convertible Note.
Section 3.03. ISSUANCE OF SHARES OF COMMON STOCK ON
CONVERSION.
(a) As promptly as practicable after the receipt of
such notice and the surrender of this Convertible Note as aforesaid, the Company
shall issue, at its expense, and shall deliver to the Holder, or on his written
order, at the aforesaid office of the Company (i) a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
this Convertible Note (or specified portion thereof), and (ii) a certificate or
certificates for any fractional shares of Common Stock issuable upon conversion
of this Convertible Note (or specified portion thereof) or, at the Company's
option, cash in lieu of scrip for any fraction of a share to which the Holder is
entitled upon conversion as provided in Section 3.05.
(b) Such conversion shall be deemed to have been
effected immediately prior to the close of business on the date ("Conversion
Date") on which the Company shall have received both such notice and the
surrendered Convertible Note as aforesaid, and at such time the rights of the
Holder of this Convertible Note shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
the Holder of record of the shares represented thereby.
(c) In the event this Convertible Note is converted
in whole or in part into shares of Common Stock pursuant to Section 3.01 hereof,
the certificates representing such shares shall contain an appropriate legend
indicating that the shares represented thereby are "restricted securities"
within the meaning of the Securities Act, and may not be transferred unless
registered under the Securities Act or transferred pursuant to an exemption
therefrom.
Section 3.04. NO ADJUSTMENTS FOR INTEREST OR DIVIDENDS. No
payment or adjustment shall be made by or on behalf of the Company on account of
any interest accrued on this Convertible Note surrendered for conversion or on
account of any cash dividends on the shares of Common Stock issued upon such
conversion which were declared for payment to the Holder of shares of Common
Stock of record as of a date prior to the Conversion Date. All payments of
accrued interest on this Convertible Note shall be made in cash or additional
stock at the Conversion Price, at the Holder's option.
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Section 3.05. FRACTIONAL SHARES. The Company, at its option,
may issue fractional shares of Common Stock upon any conversion of this
Convertible Note or, in lieu of any fraction of a share of Common Stock to which
any Holder would otherwise be entitled upon conversion of this Convertible Note
(or specified portions thereof), the Company may pay a cash adjustment for such
fraction in an amount equal to same fraction of the Conversion Price per share.
Section 3.06. ADJUSTMENT OF CONVERSION PRICE. The Conversion
Price shall be adjusted as set forth in this section.
(a) In the event that the Company shall make any
distribution of its assets upon or with respect to its shares of Common Stock,
as a liquidating or partial liquidating dividend, or other than as a dividend
payable out of earnings or any surplus legally available for dividends under the
laws of the state of incorporation of the Company, the Holder of this
Convertible Note, upon the exercise of his right to convert after the record
date for such distribution or, in the absence of a record date, after the date
of such distribution, receive, in addition to the shares subscribed for, the
amount of such assets (or, at the option of the Company, a sum equal to the
value thereof at the time of distribution as determined by the Board of
Directors in its sole discretion) which would have been distributed to the
Holder if he had exercised his right to convert immediately prior to the record
date for such distribution or, in the absence of a record date, immediately
prior to the date of such distribution.
(b) In case at any time the Company shall subdivide
its outstanding shares of Common Stock into a greater number of shares, the
Current Conversion Price in effect immediately prior to such subdivision shall
be proportionately reduced and conversely, in case the outstanding shares of
Common Stock of the Company shall be combined into a smaller number of shares,
the Current Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
(c) If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or the sale, transfer or lease of all
or substantially all of its assets to another corporation, shall be effected in
such a way that the holder of shares of Common Stock shall be entitled to
receive shares, securities or assets with respect to or in exchange for shares
of Common Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, the Company or such successor or purchasing
corporation, as the case may be, shall execute an amendment to this Convertible
Note providing that the Holder of this Convertible Note shall have the right
thereafter and until the expiration of the period of convertibility to convert
this Convertible Note into the kind and amount of shares, securities or assets
receivable upon such reorganization, reclassification, consolidation, merger or
sale by a holder of the number of shares of Common Stock into which this
Convertible Note might have been converted immediately prior to such
reorganization, reclassification, consolidation, merger or sale, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 3.
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(d) Upon such adjustment of the Conversion Price
pursuant to the provisions of this Section 3.06, the number of shares issuable
upon conversion of this Convertible Note shall be adjusted to the nearest full
amount by multiplying a number equal to the Conversion Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Convertible Note immediately prior to such
adjustment and dividing the product so obtained by the adjusted Conversion
Price.
Section 3.07. COVENANT TO RESERVE SHARES FOR CONVERSION. The
Company covenants that it will at all times reserve and keep available out of
its authorized shares of Common Stock, such number of shares of Common Stock as
shall then be deliverable upon the conversion of this Convertible Note. All
shares of Common Stock which shall be deliverable shall be duly and validly
issued and fully paid and nonassessable.
Section 3.08. NOTICE OF CHANGE OF CONVERSION PRICE. Whenever
the Conversion Price is adjusted, as herein provided, the Company shall promptly
send to the Holder a certificate of a firm of independent public accountants
(who may be the accountants regularly employed by the Company) selected by the
Board of Directors setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
certificate shall be conclusive evidence of the correctness of such adjustment.
Section 4. MISCELLANEOUS.
Section 4.01. OPTIONAL PREPAYMENTS. The Company shall have the
privilege, at any time and from time to time prior to Maturity, upon at least 90
days prior written notice to the Holder, of prepaying this Convertible Note,
either in whole or in part, by payment of the principal amount of this
Convertible Note, or portion thereof to be prepaid, and accrued interest thereon
to the date of such prepayment, without premium or penalty; provided, however,
that nothing in this Section 4.01 shall prohibit the Holder from converting this
Convertible Note in accordance with Section 3 hereof after the date of receipt
of notice of prepayment and prior to the date of receipt in cash of all amounts
to be prepaid.
Section 4.02. GOVERNING LAW. This Convertible Note shall be
construed in accordance with the laws of the State of New York applicable to
contracts entered into and to be performed wholly within said State.
Section 4.03. SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Convertible Note contained by or
on behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
Section 4.04. COURSE OF DEALING; NO WAIVER. No course of
dealing between the Company and the Holder shall operate as a waiver of any
right of the Holder and no delay on the part of the Holder in exercising any
right hereunder shall so operate.
Section 4.05. WAIVER OF COMPLIANCE. Any term, covenant,
agreement or condition hereof may be amended, or compliance therewith may be
waived (either generally or in a particular instance and either retroactively or
prospectively), if the Company shall have obtained the agreement or consent in
writing of the Holder.
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Section 4.06. OTHER PROVISIONS. The Company waives demand,
presentment, protest, notice of dishonor and any other form of notice, that may
be required to hold the Company liable on this Note.
Section 4.07 SUPERSEDES PRIOR NOTES. The terms of this
Convertible Note amend and supersede the terms of the convertible promissory
note originally issued to the Holder on the date set forth above, and any
amendments thereto.
IN WITNESS WHEREOF, the undersigned has caused this Convertible Note to
be signed in its corporate name by one of its officers thereunto duly
authorized, and to be dated as of the date first written above.
MILITARY RESALE GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
Receipt of this Convertible Note is hereby acknowledged by the undersigned
▇▇▇▇▇▇.
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(Please sign name above)
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