EXHIBIT 10.3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THIS NOTE,
THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR, IF REQUESTED BY
THE COMPANY, THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR HOLDER OF THIS NOTE
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
INNUITY, INC.
15% CONVERTIBLE SECURED PROMISSORY NOTE
$______________ June __, 2006
Redmond, Washington
FOR VALUE RECEIVED, Innuity, Inc., a Utah corporation (the "Company"),
hereby unconditionally promises to pay to _______________________ ("Holder"), or
Holder's registered assigns, at such place or places as Holder may from time to
time designate in writing, the aggregate principal sum of
_____________________________________ ($______________), together with all
accrued and unpaid interest thereon, as provided herein. All unpaid principal,
together with the balance of unpaid and accrued interest and other amounts
payable hereunder, shall be due and payable on demand at any time upon and after
the earlier of (a) June __, 2008 (the "Maturity Date"), or (b) the occurrence of
an Event of Default (as defined herein). This 15% Convertible Secured Promissory
Note (this "Note") is one of a series of convertible secured promissory notes of
the Company in the aggregate principal amount of up to Four Million Dollars
($4,000,000), or such greater amount as determined by the Company (the "Notes"),
issued to accredited investors pursuant to a certain Securities Purchase
Agreement, by and among the Company and each purchaser of a Note. All cash
payments by the Company under this Note shall be in immediately available U.S.
funds. Capitalized terms used and not otherwise defined herein that are defined
in the Purchase Agreement shall have the meanings given such terms in the
Securities Purchase Agreement of even date herewith.
A. Definitions.
1. "Change of Control Event" shall mean (a) any transaction in which the
Company consummates a merger, consolidation, share exchange or other transaction
or series of related transactions resulting in the exchange of the outstanding
shares of the Company for securities of or other consideration issued, or caused
to be issued, by an acquiring entity or any of its affiliates, in any such case
if the shareholders of the Company immediately prior to such event own less than
a majority of the outstanding voting equity securities of the surviving entity
immediately following the event, or (b) a sale, lease, exclusive license or
other disposition of all or substantially all of the assets of the Company.
2. "Majority of the Noteholders" shall mean at least a
majority-in-interest of holders of the Notes (such majority determined on the
basis of each Holder's proportionate share of the aggregate unpaid principal
amount of all Notes then outstanding). Where action is taken by a Majority of
the Noteholders, such action shall be binding on each holder of a Note, whether
or not such holder has consented in writing to such action.
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3. "Conversion Shares" shall mean the shares of Common Stock (or Allowed
Consideration) issuable upon conversion of this Note pursuant to Section B.3(a),
including any securities of another company for which the Company's Common Stock
has been exchanged.
4. "Obligations" shall mean the outstanding principal and accrued but
unpaid interest due hereunder and any additional amounts payable pursuant to the
terms hereof
5. "Exempt Issuance" shall mean shares of Common Stock issued or issuable:
(a) Upon conversion of the Notes or upon exercise of the Warrants;
(b) To officers, directors or employees of, or consultants to, the
Company pursuant to stock option or stock purchase plans or agreements on terms
approved by the Board of Directors of the Company;
(c) In connection with a strategic merger, acquisition, business
combination, strategic licensing transactions, supply agreements and/or to
commercial banks or leasing companies; and
(d) Upon exercise or conversion of outstanding options, warrants,
promissory notes, or other securities convertible into or exchangeable for
Common Stock as of the date hereof.
6. "Additional Shares of Common Stock" shall mean all shares of Common
Stock issued or issuable by the Company after the date hereof, other than an
Exempt Issuance.
7. "Publicly Traded Securities" shall mean a class of the Company's equity
securities that is registered under Section 12(g) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or a class of equity
securities of another company or entity that is registered under Section 12(g)
or 15(d) of the Exchange Act, for which a class of the Company's equity
securities has been exchanged.
B. Payment. All payments shall be made in lawful money of the United States of
America at the principal office of the Company, or at such other place as the
holder hereof may from time to time designate in writing to the Company.
Notwithstanding the foregoing, at the discretion of the Company, payment of any
and all accrued interest on this Note may be made in shares of Common Stock,
with such number of shares of Common Stock payable determined by dividing the
accrued interest to be paid by the Fair Market Value (as defined below) of a
share of Common Stock on the date payment is delivered (rounded to the nearest
whole share). For purposes of this Note, the "Fair Market Value" means, as of
any date, the value of a share of Common Stock as determined by the Board, in
its discretion, provided that if, on such date, the Common Stock is listed on a
Trading Market, the Fair Market Value of a share of Common Stock shall be the
average of the closing or last sale price of a share of Common Stock for the
three (3) trading days immediately prior to such payment date as quoted on the
Trading Market constituting the primary market for the Common Stock.
C. Interest; Conversion Terms.
1. Interest. Interest shall accrue with respect to the principal amount
loaned hereunder from the date hereof until such principal is fully paid or
converted, at fifteen percent (15%) simple interest per annum (computed on the
basis of a 365-day year, based upon the actual days elapsed); provided, however,
that, upon the occurrence of an Event of Default, the principal balance
hereunder shall bear interest from
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and after the date of the Event of Default at a rate of twenty-five percent
(25%) simple interest per annum (computed on the basis of a 365-day year, based
upon the actual days elapsed). Interest shall be payable quarterly and may be
payable, at the sole discretion of the Company (i) in cash, or (ii) in shares of
Common Stock, valued at the Fair Market Value, equal to the amount of the
interest payment due and owing.
2. Prepayment. Prior to June __, 2007, this Note may not be prepaid except
with the express written consent of Holders of a Majority of the Noteholders.
Subject to the preceding sentence, the Company may prepay all or any portion of
the Notes at any time by paying to Holder, in addition to principal and accrued
interest, a prepayment fee equal to twenty-five percent (25%) of such principal
amount subject to prepayment; provided, however, that the Company shall give
Holder twenty (20) days' prior written notice of such prepayment, during which
time Holder may elect to convert the outstanding principal amount and accrued
but unpaid interest under the Note pursuant to Section C.3.(b) by giving the
Company written notice of ▇▇▇▇▇▇'s election (the "Notice PERIOD"). Any such
prepayment shall be made on a pro rata basis to each Holder of a Note, based on
the principal amount of the Notes then outstanding at the time of prepayment,
and will be applied first to the payment of expenses due under each Note, second
to interest accrued on each Note and third, if the amount of prepayment exceeds
the amount of all such expenses and accrued interest, to the payment of
principal of each Note.
3. Conversion.
(a) Optional Conversion. Any Holder of this Note has the right, at
Holder's option, at any time prior to payment in full of the principal balance
of this Note, to convert this Note (including principal and accrued but unpaid
interest to the date of conversion) in accordance with the provisions of this
Section C.3, in whole or in part, into Conversion Shares. The number of
Conversion Shares to be issued upon such conversion shall be equal to the number
obtained by dividing (i) the outstanding principal amount and accrued but unpaid
interest under this Note on the date of conversion by (ii) the Conversion Price.
The initial "Conversion Price" shall be equal to $1.50. The number of Conversion
Shares issuable to Holder upon such conversion shall be rounded down to the
nearest whole number.
(b) Mechanics and Effects of Conversion.
(i) Before Holder shall be entitled to convert this Note into
Conversion Shares pursuant to Section C.3(a), it shall surrender this Note at
the office of the Company and shall give written notice by mail, postage
prepaid, to the Company at its principal executive office, of the election to
convert the same pursuant to Section C.3(a), and shall state therein the name or
names in which the certificate or certificates for Conversion Shares are to be
issued. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of this Note, and the person
or persons entitled to receive the Conversion Shares upon such conversion shall
be treated for all purposes as the record holder or holders of such Conversion
Shares as of such date.
(ii) As soon as practicable after conversion of this Note, and
upon surrender of this Note, the Company will deliver or cause to be issued in
the name of and delivered to Holder a certificate or certificates representing
the number of Conversion Shares to which Holder shall be entitled on such
conversion. No fractional shares will be issued on conversion of this Note, and
in lieu thereof Holder shall be entitled to payment in cash of the amount of
this Note not converted into Conversion Shares. Upon full conversion of this
Note and the issuance of the certificate(s) and payment of cash for fractional
shares as contemplated herein, the Company shall be forever released from all
its Obligations and liabilities under this Note.
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(c) Notice Regarding Change of Control Event. At least five (5) days
prior to the anticipated closing of a Change of Control Event, written notice
shall be delivered to the Holder of this Note pursuant to Section G.5 below
notifying Holder of the terms and conditions of the Change of Control Event, the
amount of the outstanding principal amount and accrued but unpaid interest under
this Note, the anticipated date on which any such conversion will occur and
calling upon such Holder to inform the Company whether Holder intends to elect
to convert the outstanding principal amount and accrued but unpaid interest into
Conversion Shares. Following notice of the Change of Control Event, any
conversion of this Note by Holder may be made contingent upon the consummation
of such Change of Control Event, if so elected by ▇▇▇▇▇▇ in the notice of
conversion.
(d) No Rights as Shareholder. Prior to its conversion, this Note
shall not entitle Holder to any voting rights or to any other rights as a
shareholder of the Company or to any other rights whatsoever except the rights
stated herein or in the agreements referenced herein.
(e) Withholding Obligations; Form 1099. Holder authorizes the
Company to withhold from Holder, or to demand cash payment from Holder for, any
taxes required to be withheld from Holder on the conversion of this Note, or, to
reduce or eliminate such withholding, to provide the Company with an fully
executed and completed IRS Form W-9. ▇▇▇▇▇▇ acknowledges that the Company may
issue Holder a Form 1099, reporting the interest, to the Internal Revenue
Service (even if the interest is converted into stock), in accordance with law.
(f) Conversion Price Adjustments.
(i) In the event the Company should at any time while this
Note is outstanding fix a record date for the effectuation of a split or
subdivision of the Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock without payment of any consideration by such holder for
the additional shares of Common Stock, then, as of such record date, the
Conversion Price of this Note shall be appropriately decreased so that the
number of shares of Common Stock issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares of Common Stock.
(ii) In the event the Company should at any time while this
Note is outstanding, offer or sell, or otherwise issue any Additional Shares of
Common Stock, at an effective price per share less than the Conversion Price in
effect on the date of and immediately prior to such issue, then and in such
event, the Conversion Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such Conversion
Price by a fraction, (A) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock which the aggregate consideration received by the Company
for the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price in effect immediately prior to such issuance,
and (B) the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of such
Additional Shares of Common Stock so issued. For purposes of the above
calculation, the number of shares of Common Stock outstanding immediately prior
to such issuance shall be calculated on a fully diluted basis, as if all
securities convertible or exercisable into shares of Common Stock had been fully
converted or exercised immediately prior to such issuance. Notwithstanding the
foregoing, no adjustments shall be made, paid or issued under this Section
C.3(f) in respect of an Exempt Issuance. The Company shall notify the Holder in
writing as promptly as reasonably possible following the issuance of any
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Additional Shares of Common Stock subject to this section, indicating therein
the effective issuance price (such notice the "Dilutive Issuance Notice"). For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section C.3(f), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to the Conversion Price adjustment.
4. Covenants as to Conversion Shares. The Company covenants and agrees
that all Conversion Shares issued pursuant to the terms of this Note (the
"Reserved Shares") will, upon their issuance, be validly issued and outstanding,
fully paid and nonassessable and free from all taxes, liens, and charges with
respect to the issuance thereof. The Company further covenants and agrees that
the Company will at all times have authorized and reserved a sufficient number
of the Reserved Shares to provide for the conversion rights represented by this
Note. If at any time while this Note remains outstanding the number of
authorized but unissued shares of Common Stock shall not be sufficient to permit
the conversion of this Note, the Company will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
5. Consolidation or Merger of the Company. If the Company is a party to
(a) any consolidation, merger or share exchange with another corporation in
which the Company is not the survivor, (b) any consolidation or merger of
another entity into the Company in which the Company is the survivor but, in
connection therewith, the Company's equity securities are changed into or
exchanged for stock or other securities of any other entity, or (c) any capital
reorganization or reclassification of its Common Stock (in each such case
excluding any merger effected exclusively for the purpose of changing the
domicile of the Company), pursuant to any of which transactions the holders of
the Company's capital stock are entitled to receive with respect to or in
exchange for such capital stock, stock or other securities, whether alone or
together with any other consideration (such consideration being the "Allowed
Consideration"), then as a condition of such transaction, lawful and adequate
provisions shall be made whereby Holder hereof shall thereafter have the right
to purchase and receive (in lieu of Conversion Shares immediately theretofore
receivable upon the conversion of this Note) such Allowed Consideration as may
be issued or payable with respect to or in exchange for the number of such
Conversion Shares immediately theretofore receivable upon the conversion of this
Note. In any such case, appropriate provisions shall be made with respect to the
rights and interests of Holder of this Note to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Conversion Price and the number of shares receivable upon the conversion of this
Note) shall thereafter be applicable, as nearly as may be reasonably practicable
(as determined in good faith by the Company's Board of Directors, whose judgment
shall be final and binding on all Noteholders), in relation to the Allowed
Consideration thereafter deliverable upon the conversion hereof. The Company
will not effect any such consolidation or merger, unless, in connection with the
consummation thereof, the successor corporation resulting from such
consolidation or merger shall assume by written instrument the obligation to
deliver to such Holder such Allowed Consideration as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.
6. No Impairment. Except and to the extent as waived or consented to by
Holder, the Company will not, by amendment of its Articles of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Note and in the taking
of all such action as may be necessary or appropriate in order to protect the
conversion rights of Holder against impairment.
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D. Security Interest. Pursuant to the Purchase Agreement, the Company has
granted to Holder a security interest in all of the Company's right, title and
interest in presently existing and hereafter acquired personal property
described on Exhibit A attached hereto and incorporated herein by reference (the
"Collateral") to secure the payment of all of the indebtedness under the Note.
The Company agrees to take all actions reasonably requested by ▇▇▇▇▇▇ and
reasonably necessary to perfect, to continue the perfection of or to give notice
of the lien granted hereunder, including, but not limited to, execution of
financing statements; provided that the indebtedness evidenced by the Note is
hereby expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all of the Company's
Senior Indebtedness (as defined below). For the avoidance of doubt, the Company
expressly agrees to execute and file a UCC-1 financing statement with the
Secretary of State of the State of Washington as soon as reasonably practicable
following the date of this Note.
E. Subordination. The indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all the Company's Senior Indebtedness,
as hereinafter defined:
1. Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of and accrued but unpaid interest on:
(a) all indebtedness of the Company to banks, commercial finance lenders,
insurance companies or other financial institutions or lessors regularly engaged
in the business of lending money or financing business properties or operations,
which is for money borrowed by the Company, and (b) any such indebtedness or any
debentures, notes or other evidence of indebtedness issued in exchange for or to
refinance such Senior Indebtedness, or any indebtedness arising from the
satisfaction of such Senior Indebtedness by a guarantor.
2. Default on Senior Indebtedness. If any portion or all of the Senior
Indebtedness shall be declared due and payable, then, (a) so long as such Senior
Indebtedness remains due and payable, no amount shall be paid by the Company in
respect of the outstanding principal balance of this Note or accrued but unpaid
interest on this Note, unless and until the portion of the Senior Indebtedness
then due and payable shall be paid in full, and (b) no claim or proof of claim
shall be filed with the Company by or on behalf of ▇▇▇▇▇▇ of this Note by a
Majority of the Noteholders, that shall assert any right to receive any payments
in respect of the outstanding principal balance and accrued but unpaid interest
on this Note, except subject to the payment in full of the principal of and
accrued but unpaid interest on all of the Senior Indebtedness then outstanding.
If there occurs an event of default that has been declared in writing with
respect to any Senior Indebtedness, or in the instrument under which any Senior
Indebtedness is outstanding, permitting the holder of such Senior Indebtedness
to accelerate the maturity thereof, then, the Company shall immediately notify
Holder in writing, and unless and until such event of default shall have been
cured or waived or shall have ceased to exist, or all Senior Indebtedness then
due and payable shall have been paid in full, no payment shall be made in
respect of the outstanding principal balance or accrued but unpaid interest on
this Note, unless within thirty (30) days after the happening of such event of
default, the maturity of such Senior Indebtedness shall not have been
accelerated.
3. Effect of Subordination. Subject to the rights of holders of Senior
Indebtedness, pursuant to this Section E, to receive cash, securities or other
properties otherwise payable or deliverable to Holder of this Note, nothing
contained in this Section E shall impair, as between the Company and Holder, the
obligation of the Company, subject to the terms and conditions hereof, to pay to
Holder the outstanding principal balance of this Note and accrued but unpaid
interest hereon as and when the same became due and payable, or shall prevent
Holder of this Note, upon default hereunder, from exercising all right, powers
and remedies otherwise provided herein or by applicable law.
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4. Subrogation. Subject to the payment in full of all Senior Indebtedness
and until this Note shall be paid in full, Holder shall be subrogated to the
rights of holders of Senior Indebtedness (to the extent of payments or
distribution previously made to such holders of Senior Indebtedness pursuant to
the provisions of Section E.2 above) to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness. No such payments or
distributions applicable to the Senior Indebtedness shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and
Holder, be deemed to be a payment by the Company to or on account of this Note.
5. Undertaking. By its acceptance of this Note, ▇▇▇▇▇▇ agrees to execute
and deliver such documents as may be reasonably requested from time to time by
the Company or holders of Senior Indebtedness, as the case may be, in order to
implement the foregoing provisions of this Section E.
F. Default.
1. Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Note:
(a) Failure to Pay. The Company shall fail to pay when due any
principal, any interest or other payment required under the terms of this Note
on the date due and such default shall continue unremedied for a period of ten
(10) Business Days after the Company's receipt of written notice from the
Majority of the Noteholders of such failure to pay.
(b) Breach of this Note. Except in the case of Section F.1(a) above,
the Company shall be in material breach or default under any of the terms of
this Note, and such breach or default shall continue unremedied for a period of
thirty (30) Business Days after the Company's receipt of written notice from the
Majority of the Noteholders specifying such breach or default.
(c) Bankruptcy or Insolvency Proceedings.
(i) The Company shall (A) appoint, apply for or consent to the
appointment of a receiver, trustee, liquidator, custodian, assignee for the
benefit of creditors or similar judicial officer or agent to take possession,
custody, control or charge of or liquidate any of its property or assets, (B)
commence any voluntary proceeding under any provision of Title 11 of the United
States Code, as now or hereafter amended, or commence any other proceeding,
under any law, now or hereafter in force, relating to bankruptcy, insolvency,
reorganization, liquidation, or otherwise to the relief of debtors or the
readjustment of indebtedness, or (C) make any assignment for the benefit of
creditors or a composition or similar arrangement with such creditors;
(ii) The commencement against the Company of any involuntary
proceeding, or the consent by Company to any proceeding, of the kind described
in Section F.1.(c)(i) and such proceeding shall not have been dismissed within
thirty (30) days;
(iii) The Company is adjudicated bankrupt or insolvent or a
petition for reorganization is granted; or
(iv) The Company shall cause, or institute any proceeding for,
or there shall occur, the dissolution of the Company.
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2. Rights of Holders Upon Default. If any Event of Default shall occur for
any reason, whether voluntary or involuntary, and be continuing, then a Majority
of the Noteholders may, by written notice to the Company, declare all or any
portion of the Obligations to be due and payable, whereupon the full outstanding
principal and interest hereunder shall be so declared due and payable shall be
and become immediately due and payable, without further notice, demand or
presentment, all of which are expressly waived by the Company. No Holder shall
individually have any right to take any legal action or bring any suit or pursue
any other collection remedy in respect of any one or more Notes, except in
conjunction with a Majority of the Noteholders. Additionally, no action arising
from or in connection with an Event of Default under this Note shall be taken
unless a Majority of the Noteholders have elected in writing to take such
action.
G. Other Provisions.
1. Waivers and Amendments. This Note may not be amended or modified, nor
may any of its terms be waived, except by a written instrument signed by (a) a
Majority of the Noteholders and the Company or (b) Holder and the Company. Any
amendment, modification or waiver made pursuant to clause (a) in the preceding
sentence will be binding on Holder regardless of whether such Holder signed such
instrument; provided, however, that no such amendment, modification or waiver of
this Note will be effective, without Holder's consent, if it affects Holder in a
disproportionate manner relative to the other holders of Notes; provided,
further, however, that the Company may amend the first paragraph of this Note,
without the consent of the Holder or a Majority of the Holders, to increase the
total amount to be raised by the Company through the issuance and sale of the
Notes.
2. Severability. If any provision of this Note is determined to be
invalid, illegal or unenforceable, in whole or in part, the validity, legality
and enforceability of any of the remaining provisions or portions of this Note
shall not in any way be affected or impaired thereby and this Note shall
nevertheless be binding between the Company and Holder.
3. Governing Law. This Note shall be governed by and interpreted in
accordance with the internal laws of the State of Washington. In any action
brought or arising out of this Note, the Company and Holder hereby consent to
the jurisdiction of any federal or state court having proper venue within the
State of Washington and also consent to the service of process by any means
authorized by the Washington law.
4. Binding Effect. This Note shall be binding upon, and shall inure to the
benefit of, the Company and ▇▇▇▇▇▇ and their respective successors and assigns.
5. Notices. Any notice required or desired to be served, given or
delivered hereunder shall be in writing and in the form and manner specified
below, and shall be addressed to the party to be notified as follows:
If to the Company: Innuity, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
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With a copy to:
DLA ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ US LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
If to Holder: __________________________
__________________________
__________________________
or to such other address as each party designates to the other by notice in the
manner herein prescribed. Notice shall be deemed given hereunder if (a)
delivered personally or otherwise actually received, (b) sent by overnight
delivery service, or (c) mailed by first-class United States mail, postage
prepaid, registered or certified, with return receipt requested. Notice mailed
as provided in clause (iii) above shall be effective upon the expiration of
three (3) Business Days after its deposit in the United States mail. Notice
given in any other manner described herein shall be effective upon receipt by
the addressee thereof; provided, however, that if any notice is tendered to an
addressee and delivery thereof is refused by such addressee, such notice shall
be effective upon such tender unless expressly set forth in such notice.
"Business Day" means any day other than (x) a Saturday or Sunday, or (y) a day
on which banks in Seattle, Washington are required to be closed.
6. Costs. The Company agrees to pay reasonable costs of collection of any
amounts due hereunder arising as a result of any default hereunder, including
without limitation, reasonable attorneys' fees and expenses.
7. Payment. Payment shall be made in lawful tender of the United States.
8. Transfer of Note or Securities Issuable on Conversion Hereof. Prior to
conversion, neither this Note nor any rights hereunder may be transferred by
▇▇▇▇▇▇ without the consent of the Company, except that ▇▇▇▇▇▇ may freely assign
this Note to an affiliate of Holder. For purposes of this agreement, "affiliate"
shall be deemed to include with respect to a Holder: (a) a partnership or
limited liability company, its partners, members, shareholders, former partners,
former members or an affiliated entity managed by the same manager or managing
partner or management company, or managed or owned by an entity controlling,
controlled by, or under common control with, such member or manager or managing
partner or management company, or (b) an individual, his or her spouse or lineal
descendant or antecedent, or a trust or trusts for the exclusive benefit of
Holder or Holder spouse or lineal descendant or antecedent, in each such case in
connection with bona fide estate planning purposes. In the event this Note is
transferred in accordance with this Section G.8, the new holder shall be deemed
to be the "Holder" with respect to the provisions of this Note.
9. Replacement Note. If this Note is lost, stolen, mutilated or destroyed,
the Company shall issue a new Note of like denomination, tenor and date as this
Note, subject to the Company's right to require Holder to give the Company a
bond or other satisfactory security sufficient to indemnify the Company against
any claim that may be made against it (including any expense or liability) on
account of the alleged loss, theft, mutilation or destruction of this Note or
the issuance of such new Note.
15% CONVERTIBLE SECURED
PROMISSORY NOTE
9
10. Headings. Section headings used in this Note have been set forth
herein for convenience of reference only. Unless the contrary is compelled by
the context, everything contained in each section hereof applies equally to this
entire Note.
IN WITNESS WHEREOF, the Company has caused this 15% Convertible Secured
Promissory Note to be issued as of the date first written above.
INNUITY, INC.
By: _______________________________
_______________________________
_______________________________
15% CONVERTIBLE SECURED
PROMISSORY NOTE
10
EXHIBIT A
COLLATERAL
(a) patents and patent applications including, without limitation,
the inventions and improvements described and claimed in those patents and
patent applications, including but not limited to those patents listed on
Schedule A attached to and made a part of this Exhibit, and (a) the reissues,
divisions, continuations, renewals, extensions and continuations-in-part of
those patents and patent applications, (b) all income, damages and payments now
and in the future due or payable under or with respect to those patents and
patent applications, including, without limitation, damages and payments for
past or future infringements, (c) the right to sue for past, present and future
infringements, and (d) all rights corresponding to those rights throughout the
world;
(b) trademarks, trademark registrations, trademark applications,
trade names and trade styles, service marks, service mark registrations and
service mark applications including, without limitation, the trademarks, trade
names, service marks and applications and registrations listed on Schedule A
attached to and made a part of this Exhibit, and (a) renewals or extensions of
those marks, registrations, applications, names and styles, (b) all income,
damages and payments now and in the future due or payable with respect to marks,
registrations, applications, names and styles, including, without limitation,
damages and payments for past or future infringements, (c) the right to sue for
past, present and future infringements, and (d) all rights corresponding to
those rights throughout the world (all of the foregoing trademarks, trade names
and trade styles, service marks and applications and registrations, together
with the items described in clauses (a)-(d) of this subsection are sometimes
referred to individually as a "Trademark" and, collectively, as the
"Trademarks");
(c) the goodwill of the Company's business connected with and
symbolized by the Trademarks;
(d) copyrights and copyright registrations and applications,
including but not limited to those copyrights listed on Schedule A attached
hereto and made a part of this Exhibit, and (a) renewals, extensions and
continuations of those copyrights, registrations and applications, (b) all
income, damages and payments now and in the future due or payable under or with
respect to those copyrights, registrations and applications, including without
limitation, damages and payments for past, present and future infringements, (c)
the right to sue for past, present and future infringements, and (d) all rights
corresponding to those rights throughout the world; and
(e) all personal property, whether presently existing or hereafter
created or acquired, including, without limitation, all accounts, chattel paper,
documents, instruments, money, deposit accounts, general intangibles, returns,
repossessions, books and records relating thereto, and equipment containing such
books and records; all goods, including, without limitation, equipment and
inventory.
15% CONVERTIBLE SECURED
PROMISSORY NOTE