EXHIBIT A FORM OF NOTE FOR SINGLE UNIT INVESTMENT
EXHIBIT A
FORM
OF NOTE FOR SINGLE UNIT INVESTMENT
THIS
NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
SHARES 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 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO
SYS THAT SUCH REGISTRATION IS NOT REQUIRED.
FOR
VALUE
RECEIVED, SYS, a California corporation (the “Borrower”), hereby promises to pay
to _______________________________ (the “Holder”), the sum of
________________________ Dollars ($___________), with interest accruing at
the
simple annual rate of ten percent (10%), on __________, ____ (the “Maturity
Date”).
The
following terms apply to this Note:
ARTICLE
1
PAYMENT
RELATED PROVISIONS
1.1. Payment
Grace Period.
The
Borrower will have a twenty (20) day grace period to pay any monetary amounts
due under this Note, after which grace period a default interest rate of the
higher of (i) one percent (1%) per month or (ii) the maximum amount
allowed by law will apply to the amounts past due hereunder.
1.2. Interest
Rate.
Subject
to the Holder’s right to convert, interest payable on this Note will accrue at
the simple annual rate of ten percent (10%) and be payable (i) on each
April 1, July 1, October 1 and January 1 after the date on
which this Note is executed by the Borrower (the “Closing Date”) (ii) on
any Conversion Date and (iii) on the Maturity Date, accelerated or
otherwise, when the principal and remaining accrued but unpaid interest is
due
and payable.
ARTICLE
2
CONVERSION
RIGHTS
The
Holder will have the right to convert the principal amount due under this Note
into Shares of the Borrower’s Common Stock as set forth below.
2.1. Conversion
Rights.
The
Holder will have the right from and after the Closing Date, and then at any
time
until the Maturity Date, to convert all, but not part, of the outstanding and
unpaid principal portion of this Note (the date of giving of such notice of
conversion, a “Conversion Date”) into ______ shares of fully paid and
nonassessable shares of restricted common stock of the Borrower (as such stock
exists on the date of issuance of this Note, or any shares of capital stock
of
the Borrower into which such stock is hereafter changed or reclassified, the
“Common Stock”) at the conversion price of $________ per share (the “Conversion
Price”). Within three (3) business days after the delivery to the Borrower of
the attached Notice of Conversion, fully executed by the Holder, the Borrower
will issue and deliver to the Holder ______ shares of Common Stock, along with
accrued but unpaid interest on the Note through the Conversion Date (subject
to
adjustment as provided in Section 2.2 below). In the event that at any time
and from time to time following the one-year anniversary of the date of this
Note, (i) the resale of the shares of Common Stock underlying this Note is
subject to an effective registration statement under the Securities Act of
1933,
as amended, and (ii) the closing price of the Borrower’s Common Stock on
the principal exchange on which it is traded is at least 50% greater than the
Conversion Price for five or more consecutive trading days, then, at any time
within twenty (20) days thereafter, Borrower may demand the conversion of the
original principal amount of this Note and, upon such demand, the principal
amount of this Note shall be converted in accordance with the terms hereof
and
any accrued and unpaid dividends shall be paid by the Borrower to the Holder.
Certificates evidencing shares of Common Stock issued upon conversion of this
Note shall bear a legend indicating that the issuance of the shares was not
registered under applicable securities laws and that the shares may be resold
only pursuant to a registration or an exemption from registration. The Borrower
covenants that it will at all times do any and all lawful thing necessary to
effect the conversion of this Note, including without limitation, by proper
corporate action taking all steps necessary to have available at all times
during which this Note remains outstanding all Common Stock issuable upon
conversion of this Note.
2.2. Conversion
Price Adjustments.
The
Conversion Price described in Section 2.1 and the number and kind of shares
or other securities to be issued upon conversion determined pursuant to
Section 2.1 is subject to adjustment upon any of the following
events:
2.2.1. Merger,
Consolidation or Sale of Assets.
If the
Borrower at any time consolidates with or merges into, or sells or conveys
all
or substantially all of its assets to, any other entity, the unpaid principal
portion of this Note and accrued interest thereon will thereafter be deemed
to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable, on account
of such consolidation, merger, sale or conveyance, upon or with respect to
the
securities subject to the conversion or purchase right immediately prior to
such
consolidation, merger, sale or conveyance. The foregoing provision will
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section 2.2 will apply to such securities
of such successor or purchaser after any such consolidation, merger, sale or
conveyance.
2.2.2. Reclassification.
If the
Borrower at any time, by reclassification or otherwise, changes the Common
Stock
into the same or a different number of securities of any class or classes,
the
unpaid principal portion of this Note and accrued interest thereon will
thereafter be deemed to evidence the right to purchase such number and kind
of
securities as would have been issuable as the result of such change with respect
to the Common Stock immediately prior to such reclassification or other
change.
2.2.3. Stock
Splits, Combinations and Dividends.
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 is paid on the Common Stock
in shares of Common Stock, the Conversion Price will be proportionately reduced
in case of subdivision of shares or stock dividends or proportionately increased
in the case of combination of shares, in each such case by the ratio which
the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares outstanding immediately prior to such
event.
2.3. Reservation
of Shares.
As of
the issuance date of this Note and for the remaining period during which the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the full conversion of this Note. The Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid
and
non-assessable. The Borrower agrees that its issuance of this Note constitutes
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 shares of Common Stock upon the conversion of this
Note.
ARTICLE
3
EVENTS
OF DEFAULT
The
occurrence of any of the following events (each, an “Event of Default”) will, at
the option of the Holder, make all sums of principal and interest then remaining
unpaid hereon and all other amounts payable hereunder immediately due and
payable, all without demand, presentment or notice, or grace period, all of
which hereby are expressly waived, except as set forth below:
3.1. Failure
to Pay Principal or Interest.
The
Borrower fails to pay any installment of principal or interest hereon when
due
and such failure continues past the grace period allowed in Section 1.1
hereof.
3.2. Breach
by ▇▇▇▇▇▇▇▇.
The
Borrower breaches any material representation, warranty, covenant or other
term
or condition of this Note in any material respect and such breach, if subject
to
cure, continues for a period of twenty (20) days after written notice to the
Borrower from the Holder.
3.3. Receiver
or Trustee.
The
Borrower makes an assignment for the benefit of creditors, applies for or
consents to the appointment of a receiver or trustee for the Borrower or for
a
substantial part of its property or business or such a receiver or trustee
is
otherwise appointed.
3.4. Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or similar law are instituted
by
or against the Borrower and are not dismissed within forty-five (45) days of
initiation.
3.5. Default.
The
Borrower, after applicable notice and cure periods, defaults under any one
or
more of its obligations in pari passu or junior to this Note.
3.6. Acceleration
of Senior Indebtedness.
There
is a default under that certain Loan and Security Agreement, dated as of
July 14, 2004, by and between Borrower and Comerica Bank for which Comerica
Bank has accelerated the indebtedness owed thereunder, or which has caused
the
maturity of such indebtedness to be automatically accelerated, which
acceleration has not been rescinded or otherwise terminated.
3.7. Failure
to Deliver Common Stock.
The
Borrower fails to timely deliver Common Stock to the Holder pursuant to and
in
the form required by this Note.
ARTICLE
4
MISCELLANEOUS
4.1. Notices.
Any
notice required or permitted hereunder must be in writing and either personally
served or sent by facsimile transmission (with a copy sent by regular, certified
or registered mail or by overnight courier). For the purposes hereof, the
address and facsimile number of the Holder is
________________________________________________, facsimile number __________.
The address and facsimile number of the Borrower is SYS, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and facsimile number
▇▇▇-▇▇▇-▇▇▇▇. Both the Holder and the Borrower may change the address and
facsimile number for notice by service of notice to the other party as herein
provided.
4.2. Amendment
Provision.
The
term “Note” and all reference thereto, as used throughout this instrument, means
this instrument as originally executed, or if later amended or supplemented,
then as so amended or supplemented.
4.3. Assignability.
This
Note will be binding upon the Borrower and its successors and permitted assigns,
will inure to the benefit of the Holder and its successors and permitted
assigns, and may be assigned by the Holder.
4.4. Governing
Law.
This
Note will be governed by, and construed and enforced in accordance, with the
laws of the State of California, without regard to the conflict of laws
principles thereof. Subject to Section 4.6, any action brought by either
party against the other concerning the transactions contemplated by this Note
may be brought only in the state courts of California or in the federal courts
located in San Diego County in the State of California. Both parties agree
to submit to the jurisdiction of such courts.
4.5. Maximum
Payments.
Nothing
contained herein may be deemed to establish or require the payment of a rate
of
interest or other charges in excess of the maximum permitted by applicable
law.
In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum permitted by such law, any payments in excess
of
such maximum will be credited against amounts owed by the Borrower to the Holder
and thus refunded to the Borrower.
4.6. Arbitration.
Any
action to enforce or interpret this Note, or to resolve disputes with respect
to
this Note between the Holder and the Borrower, will be settled by arbitration
in
accordance with the rules of the American Arbitration Association (“AAA”). The
AAA, through its San Diego, California office, will administer the
arbitration. Either party may commence arbitration by sending a written demand
for arbitration, setting forth the nature of the matter to be resolved by
arbitration, to the other party. The arbitrator will apply the substantive
law
of the State of California to the resolution of the dispute. The prevailing
party will be entitled to reimbursement from the other party of arbitration
costs, attorney fees, costs and expenses incurred in connection with the
arbitration. All decisions of the arbitrator will be final, binding and
conclusive on the parties thereto.
4.7. Attorney
Fees.
In the
event any attorney is employed by either party to this Note with regard to
any
legal or equitable action, arbitration or other proceeding brought by such
party
for the enforcement of this Note or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Note, the prevailing party in such proceeding will be entitled to recover from
the other party reasonable attorneys’ fees and other costs and expenses
incurred, in addition to any other relief to which the prevailing party may
be
entitled.
IN
WITNESS WHEREOF,
the
Borrower has caused this Note to be signed in its name by its Chief Executive
Officer on this 14th day of February, 2006.
| SYS | ||
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By:
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| ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. | ||
| President and Chief Executive Officer |
WITNESS:
NOTICE
OF CONVERSION
(To
be
executed by the Holder in order to convert the Note)
The
undersigned hereby elects to convert the Note issued by SYS on __________,
200_
into Shares of Common Stock of SYS according to the conditions set forth in
such
Note, as of the date written below.
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Date
of Conversion:
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Conversion
Price:
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Shares
To Be Delivered:
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Signature:
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Print
Name:
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Address:
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