Exhibit 10.11
PROMISSORY NOTE REPURCHASE AGREEMENT
THIS PROMISSORY NOTE REPURCHASE AGREEMENT (this "Agreement"), made as of
the 1st day of September 1999, is by and between ▇▇▇▇▇▇ ▇.. Sunyich ("Sunyich")
and RoomSystems, Inc., a Nevada corporation (the "Corporation").
R E C I T A L S:
WHEREAS, between May, 1998 and August, 1999, Sunyich loaned $205,209 in
principal to the Corporation and received from the Corporation that certain
Promissory Note (the "Note"), a copy of which is attached here to as Exhibit "A"
and incorporated herein by reference, which Note bears interest thereon at the
rate of eighteen percent (18%) per annum, from the date of execution; and
WHEREAS, in addition to the interest due under the Note, the Corporation
promised to deliver to Sunyich, monthly, 100 shares of its Common Stock for
every $1,000 loaned to the Corporation; and
WHEREAS, as of the date of this Agreement, Sunyich has accrued 138,611
shares of the Corporation's Common Stock (the "Accrued Shares"); and
WHEREAS, Sunyich is entitled to continue to accrue shares of the
Corporation's Common Stock until the Note is paid in full (the "Accrual
Obligation"); and
WHEREAS, the Corporation is unable to pay the Note and the Note is now in
default; and
WHEREAS, the principal amount, including accrued but unpaid interest, now
due, owing and unpaid under the Note is $217,303.41 (the "Obligation"); and
WHEREAS, the Corporation has offered to Sunyich the opportunity to retain
the Accrued Shares and convert (the "Conversion") the Obligation into Series B
Convertible Preferred Stock of the Corporation (the "Preferred Stock"); and
WHEREAS, Sunyich desires to convert the Obligation into the Preferred
Stock and retain the Accrued Shares; and
WHEREAS, the parties intend to set forth herein the terms and conditions
relating to the Conversion and recite any additional terms and conditions
relating thereto.
NOW THEREFORE, in consideration of the monetary consideration herein
recited, the mutual promises herein contained and subject to the fulfillment of
he conditions set forth herein, the parties agree as follows:
ARTICLE I
CONVERSION OF THE OBLIGATION
Sections 1.1 Conversion of the Obligation. On the terms, and subject to
the conditions set forth herein, Sunyich hereby converts the Obligation into the
Preferred Stock on
the same terms and conditions offered to all investors and noteholders of the
Corporation purchasing the preferred Stock. Sunyich agrees to complete a
Subscription Agreement relative to the Conversion and remit the same to the
Corporation.
Sections 1.2 Retention of the Accrued Shares. Sunyich shall be entitled to
retain the Accrued Shares.
ARETICLE II
THE ACCRUAL OBLIGATION
Section 2.1 The Conversion to Common Stock. The Corporation has
represented to Sunyich that each holder of the Preferred Stock shall
automatically, upon the earlier of (A) the effective date of the Corporation's
Initial Public Offering ("IPO"); or (B) June 30, 2000; and upon surrender of all
certificates representing ownership of Preferred Shares, convert all of such
holder's Preferred Stock into fully paid and non-assessable Common Stock (the
"Common Stock") of the Corporation, at the rate of the lesser of $3.00 per share
of fifty percent (50%) of the IPO price per share (the "Conversion Price"); or
in other words, the Preferred Stock shall be converted into the Common Stock on
a 1:1 basis, provided that the IPO price (the "IPO Price") is $6.00 per share.
If the IPO Price is less than $6.00 per share, the Conversion Price shall be the
IPO Price divided by 2.
Section 2.2 IPO. If the Corporation has filed a registration statement for
an IPO by March 31, 2000, but the same is not effective by June 30, 2000
(because of conditions and circumstances outside the control of the
Corporation), the Corporation shall have ninety (90) days to complete the IPO.
If the IPO is not completed by September 28, 2000, each holder of the Preferred
Stock, including Sunyich, shall have the option to convert such shares into the
Common Stock or remain a holder of the Preferred Stock. At any time after
September 28, 2000, if the Corporation has not completed the IPO, the conversion
of each share of preferred Stock shall be converted into one and one-half (1.5)
shares of Common Stock (the "Conversion Shares").
Section 2.3 The Additional Accrual Obligation. As set forth herein,
Sunyich is entitled to the Accrual Obligation. Sunyich agrees to waive,
renounce, relinquish and surrender the Accrual Obligation on the following
condition: that the Corporation has fully funded the IPO on or before September
28, 2000 (the "Accrual Condition"). If the Accrual Condition is not met, the
Corporation shall remit, in addition to the Conversion Shares, to Sunyich on
September 29, 2000, two (2) shares of its Common Stock for each dollar of the
Obligation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUNYICH
Section 3.1 Representations and Warranties of Sunyich. Sunyich hereby
represents and warrants as follows:
A. Ownership of the Note. That Sunyich is the owner of good and
marketable title to the Note and the same is free and clear of all liens, debts,
security interests, adverse claims or obligations, except as otherwise
disclosed.
B. Binding Agreement. That upon execution and delivery hereof and at
the execution of this Agreement and any agreements contemplated herein, all of
such shall be legal, valid and binding obligations of Sunyich and shall be
enforceable against Sunyich in accordance with their respective terms.
C. Other Agreements. That except as otherwise herein provided, the
execution and delivery of this Agreement and the consummation of the
transactions provided for herein will not result in a breach of any terms or
provision of, or constitute a default under any other agreement or instrument to
which Sunyich is a party or by which Sunyich is bound, which would affect the
Note or prevent or impair the consummation of the Conversion.
D. Third Party Approvals. Except as otherwise herein set forth, no
consents or approvals of any third party or parties are required prior to the
execution, delivery and performance of this Agreement and the other documents
referred to herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CORPORAITON
Section 4.1 Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants as follows:
A. Binding Agreement. That upon execution and delivery hereof and at
the execution of this Agreement and any agreements contemplated herein, all of
such shall be legal, valid and binding obligations of the Corporation and shall
be enforceable against the Corporation in accordance with their respective
terms.
B. Other Agreements. That except as otherwise herein provided, the
execution and delivery of this Agreement and the consummation of the
transactions provided for herein will not result in a breach of any terms or
provision of, or constitute a default under any other agreement or instrument to
which the Corporation is a party or by which the Corporation is bound, which
would affect the Note or prevent or impair the consummation of the Conversion.
C. Third Party Approvals. Except as otherwise herein set forth, no
consents or approvals of any third party or parties are required prior to the
execution, delivery and performance of this Agreement and the other documents
referred to herein.
D. Obligations under the Note. The Note constitutes a valid and
binding obligation of the Corporation, enforceable against the Corporation in
accordance with its terms. As of the date hereof, the Obligation constitutes the
full amount owing by the Corporation to Sunyich under the Note.
ARTICLE V
CONDUCT OF THE CONPORATION'S BUSINESS
Section 5.1 Conduct of the Corporation's Business. The Corporation agrees
that, pending the execution of this Agreement and during term hereof, that the
business of the Corporation shall be conducted only in the ordinary course and
substantially in accordance with its prior business practices.
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 Miscellaneous Provisions. The following Miscellaneous
Provisions are an integral part of this Agreement.
A. Waiver of Breach. The waiver by any party of breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by such party.
B. Assignment. Neither party may assign any right or obligation
hereunder without the express written consent of the other party.
C. Entire Agreement. This Agreement contains the entire
understanding of the parties. It may not be changed orally but only by an
Agreement in writing signed by the party against an enforcement of any waiver,
change, modification, extension or discharge as sought.
D. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Nevada.
E. Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing sent by certified mail to the
parties at each party's last know address.
F. Attorneys' Fees. Should any party seek the enforcement of any
term of this Agreement, the prevailing party thereunder shall be entitled to
attorneys' fees and costs for the enforcement of such term or provision.
G. Section Headings. The section headings in this Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
H. Counterparts. This Agreement may be signed in two or more
counterparts, all of which shall be deemed to be one and the same agreement.
This Agreement shall become a binding obligation upon execution and delivery of
this Agreement of counterparts hereof by each of the parties hereto.
Effective Date. The effective date of this Agreement is September
1, 1999.
ROOMSYSTEMS, INC.
BY: /s/ /s/
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ITS: Chief Financial Officer ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇