Exhibit 10.1 - Subordinated Convertible Note Agreement dated January 2, 2003
entered into by Comtrex Systems Corporation and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
COMTREX SYSTEMS CORPORATION
SUBORDINATED CONVERTIBLE NOTE
Note No. 1
$50,000.00 January 2, 2003
THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933 (THE
"ACT") OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AS TO THE NOTE OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
FOR VALUE RECEIVED, the undersigned, COMTREX SYSTEMS CORPORATION, a
Delaware corporation (the "Company"), hereby promises to pay to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
or his registered assigns, the principal sum of FIFTY THOUSAND DOLLARS ($
50,000.00), as hereinafter provided, together with interest (computed on the
basis of a three hundred sixty (360) day year of twelve (12) thirty (30) day
months) on the unpaid principal balance of this Note from the date of this Note
until paid, at the rate of six percent (6%) per annum.
1. PAYMENT.
(a) Payments of the principal of and interest on this Note shall be
made in lawful money of the United States of America at the principal executive
offices of the Company.
(b) Interest accruing on the outstanding principal balance of this Note
during each calendar month shall be paid on the first day of the next calendar
month, commencing on February 1, 2003.
(c) The principal balance of this Note, if any, outstanding on the
Expiration Date (as such term is defined hereinafter), shall be paid in full on
the Expiration Date.
(d) The outstanding principal balance of this Note, together with all
accrued but unpaid interest thereon, may be prepaid, at the Company's option at
any time prior to the Expiration Date, without penalty or premium, provided that
notice of any such PREPAYMENT shall be given by the Company to the registered
holder of this Note not later than the thirtieth (30th) day before the date
fixed for prepayment (the "Prepayment Date"). On and after the Prepayment Date,
the registered holder of this Note shall have no rights with respect to this
Note except to receive the payment in full of the then outstanding principal
balance of this Note and all accrued, unpaid interest thereon.
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2. REGISTRATION AND TRANSFER.
(a) The Company shall maintain at its principal executive offices a
register for this Note, in which the Company shall record the name and address
of the person in whose name this Note has been issued and the name and address
of each transferee and prior owner thereof. The Company may deem and treat the
person in whose name this Note is so registered as the holder and owner thereof
for all purposes and all notices hereunder to the registered holder may be to
the address indicated on such register.
(b) This Note may be transferred only by the surrendering thereof for
registration of transfer duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder. The Company may condition
its registration of such transfer upon (i) the opinion of counsel acceptable to
the Company that the transfer of the Note does not violate the Act or any State
securities or blue sky laws, and (ii) the payment to it of a sum sufficient to
cover any stamp tax or other governmental charge imposed in respect of such
transfer.
3. RIGHT OF CONVERSION.
(a) The registered holder of this Note at any time may convert the
outstanding principal balance of this Note, in blocks of $5,000.00 or any
multiple thereof, into shares of the Company's Common Stock, par value $0.003
per share (the "Common Stock"), as provided herein, at the rate (subject to
adjustment as provided in Article 4 below) of one (1) share per $0.25
outstanding principal amount of this Note (the "Conversion Price"). Such right
of conversion shall automatically terminate upon the earlier to occur of (i)
5:00 P.M., local time in Philadelphia, Pennsylvania, on the fifth anniversary of
the date of this Note (the "Expiration Date"), or (ii) the Prepayment Date (as
defined in Article 1 above).
(b) The right to convert the outstanding principal balance of this Note
into shares of the Common Stock shall be exercised by the registered holder
hereof giving written notice of exercise to the Company's Secretary, in form
reasonably satisfactory to the Company, accompanied by this Note. Such notice
shall be deemed to be given when received by the Secretary of the Company, and
such notice shall be irrevocable once given. All interest on the principal
amount of this Note being converted shall cease to accrue as of the effective
date of the notice of exercise.
(c) Within fifteen (15) days after any exercise of the conversion
rights provided herein, the Company shall deliver to the registered holder of
this Note a certificate (the "Conversion Certificate") for the number of shares
of Common Stock to which such holder is entitled and, in the case of a
conversion of less than all of the then outstanding principal balance of this
Note, the Company shall cancel this Note upon the surrender hereof and shall
execute and deliver a new Note, of like tenor, for the principal balance
remaining outstanding hereunder after the issuance of the Conversion
Certificate. The Company may condition delivery of any Conversion Certificate
upon the prior receipt from the registered holder of any undertakings that the
Company may determine are required to insure that the certificate is being
issued in compliance with all applicable federal and State securities laws.
(d) The registered holder of this Note shall have no rights as a
shareholder of the Company until a conversion of this Note and the issuance to
the registered holder of this Note of a Conversion Certificate as provided
herein.
(e) Any Conversion Certificate issued pursuant to this Note shall
contain the following legend:
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THESE SHARES HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933
(THE "ACT") OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS RELATING TO
THESE SHARES OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED.
4. ADJUSTMENT FOR CAPITAL CHANGES; MERGER OR CONSOLIDATION; NON-DILUTION
PROVISIONS.
(a) In the event of a stock dividend, stock split, recapitalization,
combination, subdivision or other similar corporate change with respect to the
capital stock of the Company, the Board of Directors of the Company shall make
an appropriate and proportional adjustment in the aggregate number of shares of
Common Stock into which this Note is convertible and/or the Conversion Price per
share of Common Stock.
(b) If any merger or consolidation of the Company shall occur, then, as
a condition to such merger or consolidation, lawful and adequate provision shall
be made whereby the registered holder of this Note shall thereafter have the
right to receive upon the basis and upon the terms and conditions specified
herein (including without limitation payment of the applicable Conversion Price)
and in lieu of the shares of Common Stock of the Company immediately theretofore
receivable upon conversion of this Note, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for such
shares of Common Stock immediately theretofore receivable by such holder had
such merger or consolidation not taken place. The Company shall not effect any
such consolidation or merger, unless prior to or simultaneously with the
consummation thereof the successor (if other than the Company) resulting from
such consolidation or merger shall assume, by written instrument executed and
delivered to the holder, the obligation to deliver to the holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to receive.
(c) The Conversion Price shall be subject to automatic adjustment from
time to time as follows:
(i) If the Company shall at any time or from time to time
hereafter issue (an "Issuance") any Common Stock, options or other securities of
the Company convertible into or exchangeable for Common Stock without
consideration or for a consideration per share less than the Conversion Price
then in effect for this Note immediately prior to such issuance, the Conversion
Price shall forthwith be adjusted to a price equal to:
(A) an amount equal to the sum of:
(x) (i) The total number of shares of Common Stock outstanding immediately prior
to such Issuance, plus the maximum amount of all additional Common Stock
issuable upon conversion of this Note, multiplied by (ii) the Conversion Price
in effect immediately prior to such Issuance, and
(y) the aggregate consideration received or receivable by the Company on account
of the Issuance,
(B) divided by
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(z) the total number of shares of Common Stock outstanding immediately after the
Issuance (including for such purpose the maximum amount of additional Common
Stock issuable upon conversion of this Note plus the maximum amount of Common
Stock issued or issuable pursuant to the Issuance).
(ii) For purposes of the above calculations, the number of
shares of Common Stock outstanding immediately prior to the Issuance shall not
include any additional Common Stock issuable solely as a result of the
adjustment of the Conversion Price resulting from the application of the
foregoing provisions. Notwithstanding the foregoing, an Issuance shall not
include, for purposes of any adjustment to the Conversion Price, the issuance of
any shares of Common Stock or other securities of the Company pursuant to any
options, warrants or other rights outstanding on the date hereof or the granting
of options (and the issuance of shares of the Common Stock pursuant to such
option) to employees, officers or directors or other key individuals providing
services to the Company.
(iii) For the purposes of any adjustment of the Conversion
Price as set forth above:
(A) In the case of the issuance of Common Stock for cash, the consideration
shall be deemed to be the amount of cash paid therefor.
(B) In the case of the issuance 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.
(d) Upon any adjustment of the Conversion Price, the Company shall give
written notice to the registered holder of this Note, which notice shall state
the Conversion Price resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(e) The Company will at all times reserve and keep available out of its
authorized Common Stock, for the purpose of issuance upon conversion of this
Note as herein provided, the maximum number of shares of Common Stock as shall
then be issuable upon the exercise of the conversion privileges set forth
herein. The Company covenants that all shares which shall be so issuable shall,
upon the conversion of this Note as herein provided, be duly and validly issued
and fully paid and nonassessable by the Company.
5. EVENTS OF DEFAULT.
(a) Subject to the subordination provisions contained in Article 6
hereof, if one or more of the following events of default shall occur:
(i) The Company shall default in the payment of any principal
of or interest on this Note, and such failure shall continue for thirty (30)
days; or
(ii) The Company shall be declared, by a court of competent jurisdiction, a
bankrupt or insolvent;
then during the continuance of any such event the registered holder of this Note
may declare by written notice all the then unpaid principal amount of this Note
to be due and payable, upon which the same shall forthwith become due and
payable, together with the interest accrued thereon, without presentation,
demand, protest or notice of dishonor, all of which the Company hereby waives.
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(b) Should the indebtedness represented by this Note or any part
thereof be collected in any proceeding or placed in the hands of attorneys for
collection, the Company agrees to pay, in addition to the principal and interest
due and payable hereon, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
6. SUBORDINATION.
(a) The term "Senior Indebtedness" as utilized herein means the
principal of, premium, if any, and interest on all indebtedness of the Company,
whether outstanding on the date of this Note or thereafter created, incurred or
assumed, in respect of borrowed money from any bank, savings and loan, insurance
company or other financial institution.
(b) Notwithstanding any contrary provision contained in this Note, in
the event of (i) any liquidation, dissolution or other winding-up of the
Company, or of any receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization or other similar proceeding relative to the Company
or its property, or (ii) an event of default occurring and continuing with
respect to any Senior Indebtedness of the Company, all Senior Indebtedness
(including principal, interest, premium and penalty) shall be paid in full
before any further payment (whether principal, interest or otherwise) shall be
made with respect to this Note.
7. MISCELLANEOUS.
(a) If the date of any payment required by this Note be Saturday,
Sunday or a bank holiday, such payment shall be payable on the first business
day following such date.
(b) The Company hereby expressly waives presentment, demand, protest or
any other notice whatsoever.
(c) This Note and the terms and provisions hereof shall be interpreted
in accordance with the laws of New Jersey.
IN WITNESS WHEREOF, the Company has caused this Note to be executed,
sealed and delivered on the date first above written.
COMTREX SYSTEMS CORPORATION
By: /s/
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
Attest:
/s/
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▇▇▇▇▇▇ ▇. ▇▇▇▇, Assistant Secretary
[SEAL]
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