EXHIBIT 2
SUBSCRIPTION AGREEMENT
----------------------
("AGREEMENT")
[FOR PURCHASE OF COMMON STOCK]
THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE OR
OTHER GOVERNMENTAL AUTHORITIES SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE SECURITIES SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY OTHER
COUNTRY OR STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES
SUBSCRIBED FOR BY THIS AGREEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR
ENDORSED THE MERITS OF THE SECURITIES OFFERED BY THE COMPANY. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
c/o ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
The undersigned (the "Subscriber"), subject to the terms and conditions
set forth in this Agreement and Exhibits hereto, commits to purchase a 12%
Convertible Demand Promissory Note in the amount of $ ____________ issued by
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a corporation organized under the laws of the State of
Florida (the "Company"), to the Subscriber (the "Note" or the "Securities").
Capitalized terms which are used but not defined herein shall have the
meanings set forth in the Note attached as Exhibit B hereto.
1
Accordingly, the Subscriber and the Company hereby agree as follows:
1. SUBSCRIPTION. The Subscriber hereby subscribes for and agrees to
purchase the Note issued by the Company to the Subscriber. Under the terms and
conditions of the Note, the Company agreed and promised to pay to the
Subscriber, UPON DEMAND, at the principal offices of the Payee or at such other
place as the Payee may from time to time designate in writing, in lawful
currency of the United States of America, the principal sum of ______. The
Company further promised to pay, in the same manner, and in like currency,
interest to the Subscirber, accrued from the date of the Note on the entire
unpaid outstanding principal amount owing hereunder from time to time until the
entire unpaid outstanding principal amount hereof is paid in full, at a rate per
annum equal to twelve percent. At the option of the Payee, any and all accrued
interest as well as the principal due under this Note may be converted, upon the
Payee's demand, into the shares of the Common Stock of the Company at the
Conversion Price subject to the Conversion Price adjustment provisions as set
forth in Sections 4 and 11 of the Note.
2. PURCHASE PROCEDURE. Upon the terms and subject to the conditions of
this Agreement, at the closing of the transactions contemplated hereby (the
"Closing"), which Closing is taking place contemporaneously with the execution
and delivery of the Agreement by the parties hereto, the Subscriber acknowledges
that, in order to subscribe for the Securities, it must, and does hereby,
deliver to the Company:
2.1 An executed counterpart of the Signature Page attached to this
Agreement together with appropriate notarization; and
2.2 An executed counterpart of the Note, representing payment in full
for the Securities desired to be purchased hereunder.
3. REPRESENTATIONS OF SUBSCRIBER. By executing this Agreement, the
Subscriber represents, warrants, acknowledges and agrees as follows:
3.1 Such Subscriber acknowledges that he has received, carefully read
and understands in their entirety (i) this Agreement; (ii) the Note attached
hereto as Exhibit B, and incorporated herein by reference, (iii) all information
necessary to verify the accuracy and completeness of the Company's
representations, warranties and covenants made herein, all of which are
incorporated by reference; and (iv) written (or verbal) answers to all questions
the Subscriber submitted to the Company regarding an investment in the Company
(items described in (i)-(iv) hereof collectively referred to as the "Disclosure
Documents"); and the Subscriber has relied on the information contained therein
and has not been furnished with any other documents, offering literature,
memorandum or prospectus.
3.2 Such Subscriber understands that (i) the Securities being purchased
hereunder have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") or any applicable state securities laws, or the laws of
any foreign jurisdiction; (ii) Subscriber cannot sell such Securities unless
they are registered under the Securities Act and any applicable state securities
laws or unless exemptions from such registration requirements are available;
(iii) a legend will be placed on any certificate or certificates evidencing the
2
Securities, stating that such securities have not been registered under the
Securities Act and setting forth or referring to the restrictions on
transferability and sales of the securities; (iv) the Company will place stop
transfer instructions against the Securities and the certificates for the
Securities to restrict the transfer thereof; and (v) the Company has no
obligations to register the Securities or assist the Subscriber in obtaining an
exemption from the various registration requirements except as set forth herein.
Subscriber agrees not to resell the Securities without compliance with the terms
of this Agreement, the Securities Act and any applicable state or foreign
securities laws.
3.3 Such Subscriber (i) is acquiring the Securities solely for the
Subscriber's own account for investment purposes only and not with a view toward
resale or distribution, either in whole or in part; (ii) has no contract,
undertaking, agreement or other arrangement, in existence or contemplated, to
sell, pledge, assign or otherwise transfer the Securities to any other person;
and (iii) agrees not to sell or otherwise transfer the Subscriber's Securities
unless and until they are subsequently registered under the Securities Act and
any applicable state securities laws or unless an exemption from any such
registration is available.
3.4 Such Subscriber understands that an investment in the Securities
involves substantial risks and Subscriber recognizes and understands the risks
relating to the purchase of the Securities, including the fact that the
Subscriber could lose the entire amount of the Subscriber's investment in the
Securities.
3.5 Such Subscriber is knowledgeable about the risks associated with
the business in which the Company is engaged, namely, ____________________, and
has, either alone or together with the Subscriber's Purchaser Representative (as
that term is defined in Regulation D under the Securities Act), such knowledge
and experience in financial and business matters that the Subscriber is capable
of evaluating the merits and risks of an investment in the Company.
3.6 Such Subscriber's investment in the Company is reasonable in
relation to his net worth and financial needs and he is able to bear the
economic risk of losing his entire investment in the Securities.
3.7 Such Subscriber represents and warrants that he satisfies the
definition of "accredited investor" as set forth in Rule 501(a) of Regulation D
under the Act ("Regulation D") because the Subscriber is one of the types of
persons listed below as indicated by Subscriber's check of the appropriate
category and as specifically disclosed by the undersigned Subscriber in the
Confidential Purchaser Questionnaire executed and delivered to the Company
herewith and incorporated by this reference. (Please check the appropriate
paragraph(s)).
____ (1) Any bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section 2(13)
of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that Act; any Small
3
Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the
Small Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; any employee benefit
plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a
plan fiduciary, as defined in section 3(21) of such Act, which
is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited Subscribers;
____ (2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
____ (3) Any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;
____ (4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
____ (5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, (exclusive of personal
residence and automobiles) at the time of his purchase exceeds
$1,000,000;
____ (6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
____ (7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in Rule 230.506(b)(2)(ii); and
____ (8) Any entity in which all of the equity owners are accredited
Subscribers.
3.8 The Subscriber understands that no approval, authorization,
consent, order or other action of, or filing with, any person, firm or
corporation or any court, administrative agency or other governmental authority
is required in connection with the execution and delivery of this Agreement by
the Subscriber or the consummation of the transactions described herein, except
as disclosed herein and, except to the extent that the Subscriber or the Company
is required to file reports in accordance with relevant regulations under
federal securities laws.
4
3.9 Such Subscriber understands that (i) the offering contemplated
hereby has not been reviewed by any federal, state or other governmental body or
agency; (ii) if required by the laws or regulations of said state(s) the
offering contemplated hereby will be submitted to the appropriate authorities of
such state(s) for registration or exemption therefrom; and (iii) documents used
in connection with this offering have not been reviewed or approved by any
regulatory agency or government department, nor has any such agency or
government department made any finding or determination as to the fairness of
the Securities for investment.
3.10 Such Subscriber is aware that the Securities have not been
registered under the Securities Act. The Subscriber has adequate means of
providing for the Subscriber's current needs and personal and family
contingencies, has no need for liquidity in the investment contemplated hereby,
and is able to bear the risk of loss of his entire investment.
3.11 If the Subscriber is a natural person, such Subscriber (i) is a
citizen or resident of _______________ (state/province), ______________
(country), (ii) is at least 21 years of age, (iii) has adequate means of
providing for his current needs and personal contingencies, (iv) has no need for
liquidity in his investment in the Securities, and (v) maintains his domicile
(and is not a transient or temporary resident) at the address shown on the
Signature Page below.
3.12 All information which the Subscriber has provided the Company
concerning the Subscriber, the Subscriber's financial position and the
Subscriber's knowledge of financial and business matters, is correct and
complete as of the date hereof, and if there should be any change in such
information, the Subscriber will immediately provide the Company with such new
information. The Subscriber agrees that financial and other information
concerning the Subscriber may be disclosed by the Company to any persons or
entities that may enter into a transaction with the Company.
3.13 Such Subscriber shall not sell, assign, encumber or transfer all
or any part of the Securities being acquired or any of the securities included
therein or issuable in connection therewith (except a transfer upon his death,
incapacity or bankruptcy or a transfer without consideration to his spouse
and/or children and/or a trust for the benefit of such family members), unless
the Company has determined, upon the advice of counsel for the Company, that no
applicable United States federal or state securities laws will be violated as a
result of such transfer. The Company may require an opinion of counsel
acceptable to the Company to the effect that such transfer or assignment (i) may
be effected without registration of the Securities or any securities included
therein or issuable in connection therewith under the Securities Act, and (ii)
does not violate any applicable federal, state or other securities laws.
3.14 Such Subscriber represents that the Company has made available all
information which Subscriber deemed material to making an informed investment
decision in connection with his purchase of securities of the Company; that the
Subscriber is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables Subscriber
to obtain information from the Company in order to evaluate the merits and risks
of this investment; and that Subscriber has been represented by counsel and been
5
advised concerning the risks and merits of this investment. Further, Subscriber
acknowledges that the Company has made available to Subscriber the opportunity
to ask questions of, and receive answers from the Company, its officers,
directors and other persons acting on its behalf, including ______________,
concerning the terms and conditions of his subscription and to obtain any
additional information, to the extent the Company possesses such information or
can acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information disclosed to Subscriber. Further, Subscriber
represents that no statement, printed material or inducement was given or made
by the Company or anyone on its behalf that is contrary to the information
disclosed to Subscriber.
3.15 Such Subscriber is familiar with the nature and extent of the
risks inherent in investments in unregistered securities and in the business in
which the Company is engaged and intends to engage and has determined, either
personally or in consultation with the Subscriber's Purchaser Representative or
attorney, that an investment in the Company is consistent with the Subscriber's
investment objectives and income prospects.
3.16 The Subscriber, upon review of the Disclosure Documents and
careful consideration of the risks involved in the purchase of the Securities,
understands and acknowledges that this investment is of a speculative nature
involving a risk of loss of all or a portion of the undersigned's investment,
and that:
i) The Securities are being sold in reliance on the exemption
from the registration provisions of the Securities Act,
pursuant to Section 4(2) of the Securities Act as contained in
Regulation D promulgated by the Securities and Exchange
Commission thereunder and the Securities, will be Restricted
Securities as defined in Rule 144 under the Securities Act and
will be saleable only pursuant to a Registration Statement or
an exemption from the registration requirements under the
Securities Act. Except as provided herein, the Company has no
obligation to register the Securities pursuant to the
Securities Act. Consequently, transfer may be limited.
ii) The Securities are only being offered to the Subscriber
because the Subscriber has represented that the Subscriber is
an accredited investor (as defined in Regulation D under the
Securities Act), and the information being supplied to the
Subscriber would not be adequate to comply with the disclosure
provided in connection with a registration statement or with
information required to be provided under the Securities Act
to an unaccredited investor under Regulation D.
iii) The Subscriber has determined that the Securities are a
suitable investment for the Subscriber.
iv) The Securities shall be imprinted with a legend
substantially in the following form:
6
THE SECURITIES WHICH ARE REPRESENTED HEREBY HAVE NOT BEEN THE
SUBJECT OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION
STATEMENT WITH RESPECT THERETO IS DECLARED AND REMAINS
EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION
OF COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.
3.17 If the Subscriber is a corporation, trust, partnership or other
entity that is not a natural person, it has been formed and validly exists and
has not been organized for the specific purpose of purchasing the Securities and
is not prohibited from doing so.
3.18 If the Subscriber is purchasing the Securities in a fiduciary
capacity for another person or entity, including without limitation a
corporation, partnership, trust or any other entity, the Subscriber has been
duly authorized and empowered to execute this Agreement and all other
subscription documents, and such other person fulfills all the requirements for
purchase of the Securities as such requirements are set forth herein, concurs in
the purchase of the Securities and agrees to be bound by the obligations,
representations, warranties and covenants contained herein. Upon request of the
Company, the Subscriber will provide true, complete and current copies of all
relevant documents creating the Subscriber, authorizing his investment in the
Company and/or evidencing the satisfaction of the foregoing.
3.19 There can be no assurance that the Company will be able to operate
profitably in the future.
3.20 The Subscriber expressly represents, warrants and agrees that, in
connection with the offer and sale of the Securities described herein to the
Subscriber, the Company is relying upon the Subscriber's representations and
warranties as contained in this Agreement.
3.21 The Subscriber expressly acknowledges that the foregoing
representations and warranties are true as of the date of this Agreement and
shall be true as of the date the Company issues and sells the Securities to the
Subscriber. If such representations or warranties shall not be true in any
respect prior to such date, the Subscriber will give prompt written notice of
such fact to the Company.
3.22 The Subscriber shall not interfere with the Company's efforts to
satisfy all material liabilities of the Company in compliance with the Company's
representations made in this Agreement.
7
4. REPRESENTATIONS OF COMPANY.
4.1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Florida. The Company is duly
qualified or otherwise authorized to transact business as a foreign corporation
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the operations or financial condition of
the Company.
4.2 . The Company is authorized to issue __________shares of common
stock, $_____ par value per share, of which _________ shares are issued and
outstanding. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable and not issued in violation of the preemptive right of any person.
4.3 The execution, delivery, and performance of this Agreement and the
Note by the Company have been duly authorized by the board of directors and all
other necessary corporate action. This Agreement has been duly executed and
delivered by the Company. This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium, and similar
laws affecting the rights and remedies of creditors generally and to general
principles of equity.
4.4 Neither the execution, delivery nor performance of this Agreement
by the Company will (a) conflict with or violate any provision of the articles
of incorporation or bylaws of the Company as in effect as of the date hereof,
(b) require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any governmental entity, (c) result in
breach of, constitute a default under, or require any notice, consent, or waiver
under any contract, agreement, or other instrument to which the Company is a
party or by which it is bound (other than any consent or waiver that has already
been obtained), or (d) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to the Company, excluding from all of the
foregoing such matters as would not in the aggregate have a material adverse
effect on the assets, business, or financial condition of the Company or upon
the transactions contemplated hereby.
4.5 (a) As of the date hereof, the Company shall have filed and
furnished to the Subscribers complete and accurate copies, as amended or
supplemented, of all delinquent filings, including its (i) annual report on Form
10-KSB for the fiscal year ended _________, as filed with the SEC, (ii)
quarterly reports on Form 10-QSB for the quarters ended _____________; and (iii)
all other reports filed by the Company with the SEC under the Exchange Act since
____________, which together shall include a description of all material events
and management since the last Form 10-KSB filing for the year ended
_______________ (such reports are collectively referred to herein as the
"Company Reports"). The Company Reports constitute all of the documents required
to be filed by the Company under Sections 13, 14, or 15(d) of the Exchange Act
with the SEC since ____________.
(b) The consolidated financial statements of the Company
included in the Company Reports (i) comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (ii) have been prepared in accordance with
8
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby (except as may be indicated therein or in
the notes thereto), (iii) fairly present the consolidated financial condition,
results of operations, and cash flows of the Company as of the respective dates
thereof and for the periods referred to therein, and (iv) are consistent with
the books and records of the Company.
4.6 Except as otherwise provided herein, there are no actions, suits or
claims, legal or arbitrage proceedings, governmental inquiries or investigations
pending or, to the Company's knowledge, threatened against the Company, that
question the validity of this Agreement or the right of the Company to enter
into it, or which might result, either individually or in the aggregate, in any
material adverse change in the business, prospects, assets, or condition,
financial or otherwise, of the Company.
4.7 Since __________, and as provided in or contemplated by this
Agreement, there has not been any material adverse change in the assets,
business, financial condition, or results of operations of the Company.
4.8 The information contained in the Company Reports, as of their
respective dates, did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
4.9 (a) The Company has not filed its federal or state income tax
returns for 1997, 1998, 1999, or 2000, but as of the date hereof, will have duly
filed (and until the date hereof will so file) all returns, declarations,
reports, information returns and statements ("Returns") required to be filed by
it in respect of any other government's, national, regional, state and local
taxes (including property taxes, withholding taxes, penalties or other payments
required) (the "Taxes") and has and as of the date hereof will have duly paid
(and until the date hereof will so pay) all such Taxes due and payable, other
than Taxes or other charges that are being contested in good faith. The Company
has established (and until the date hereof will establish) on its books and
records reserves that it reasonably believes are adequate for the payment of all
Taxes not yet due and payable, but are anticipated to be incurred in respect of
the Company through the date hereof. None of the applicable tax returns of the
Company have been examined by the applicable authorities (or are closed to
examination due to the expiration of the statute of limitations) and no
deficiencies were asserted as a result of such examinations that have not been
resolved and paid in full. To the knowledge of the Company, there are no audits
or other administrative or court proceedings presently pending, or claims
asserted, for Taxes or assessments upon the Company, nor has the Company given
any currently outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or tax
Returns. No Taxes will accrue or occur as a result of the Purchase and the other
transactions contemplated in this Agreement.
(b) The Company (i) has not requested any extension of time
within which to file any tax Return which Return has not since been filed, and
(ii) is not a party to any agreement providing for the allocation or sharing of
Taxes.
9
4.10(a) The Company does not maintain or contribute to any stock option
plan, stock purchase plan, deferred compensation plan, severance plan, bonus
plan, employment agreement or other similar plan, program or arrangement.
(b) The Company does not maintain or otherwise pay for life
insurance policies (other than group term life policies on employees) with
respect to any director, officer or employee.
(c) The Company does not maintain any retirement plan or
retiree medical plan or arrangement for directors. The Company's Disclosure
Schedule sets forth the complete documentation and actuarial evaluation of any
such plan.
4.11 The Company holds all material licenses, franchises, permits, and
authorizations necessary for the lawful conduct of its business, and has
complied with and is not in default in any respect under any, applicable law,
statute, order, rule, regulation, policy, and/or guideline of any national,
state, or local governmental authority relating to the Company (other than where
such defaults or noncompliance will not, alone or in the aggregate, result in a
material adverse effect on the business, operations, assets, or financial
condition of the Company), and the Company has not received notice of violation
of, nor does it know of any violations (other than violations which will not,
alone or in the aggregate, result in a material adverse effect on the business,
operations, assets or financial condition of the Company) of, any of the above.
4.12 (a) The Company is not a party to or bound by any contract or
understanding (whether written or, to its knowledge, oral) with respect to the
employment or termination of any present or former officers, employees,
directors or consultants.
(b) As of the date of this Agreement, (i) the Company is not a
party to or bound by any commitment, agreement, or other instrument (excluding
commitments and agreements in connection with extensions of credit by the
Company) that contemplates the payment of amounts in excess of $______, or that
otherwise is material to the operations, assets, or financial condition of the
Company, including but not limited to any royalty, franchising fees, or any
other fee based on a percentage of revenues or income, and (ii) no commitment,
agreement, or other instrument to which the Company is a party or by which it is
bound limits the freedom of the Company to compete in any line of business or
with any person.
(c) As of the date of this Agreement, the Company is not in
default in any material respect under any material lease, contract, mortgage,
promissory note, deed of trust, loan agreement, license agreement, or other
commitment or arrangement.
(d) As of the date of this Agreement, to the knowledge of the
Company, any other party thereto is not in default in any material respect under
any material lease, contract, mortgage, promissory note, deed of trust, loan
agreement, license agreement, or other commitment or arrangement that is
material to the Company.
10
4.13 The minute books of the Company contain and will contain on the
date hereof records that, in all material respects, accurately record all
meetings and other corporate action of its shareholders and board of directors
(including committees of its board of directors).
4.14 To the knowledge of the Company, the allowance for possible losses
in the _____________ Company financial statements was adequate at the time based
upon past loss experiences and potential losses at the time to cover all known
or reasonably anticipated losses.
4.15 The Company is not directly or indirectly involved in or
threatened with any labor dispute or trouble or organizational effort,
including, without limitation, matters regarding actual or alleged
discrimination by reason of race, creed, sex, disability or national origin,
that might materially and adversely affect the financial condition, assets,
businesses, or results of operations of the Company, taken as a whole.
4.16 As of the date of Closing, the Company will not have any
liabilities, absolute or contingent, of any kind or nature, except for the
contingency for which separate arrangements have been made in accordance with
the provisions hereof.
4.17 Subsequent to the Closing and as soon as it may be practicable,
the Company shall change its corporate name to such corporate name that shall
bear no similarity or resemblance to existing corporate name of "▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc."
4.18 At the Closing, the Board of Directors of the Company shall accept
resignations of the executive officers of the Company and shall appoint a new
slate of such executive officers in accordance with the Company's Bylaws.
4.19 At the Closing, the Board of Directors of the Company shall elect
Messrs. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Khashoggi (the "Subscriber's designees") to
the Board of Directors of the Company; PROVIDED, HOWEVER, that current directors
of the Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ shall resign
simultaneously with the election of the Subscriber's designees to the Board of
Directors in accordance with the Company's Bylaws.
5. INDEMNIFICATION. Subscriber hereby agrees to indemnify and hold
harmless the Company and the Company's officers, directors, employees, agents,
counsel and affiliates from and against any and all damages, losses, costs,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees) which they, or any of them, may incur by reason of the Subscriber's
failure to fulfill any of the terms and conditions of this Agreement or by
reason of the Subscriber's breach of any of his representations and warranties
contained herein. This Agreement and the representations and warranties
contained herein shall be binding upon the Subscriber's heirs, executors,
administrators, representatives, successors and assigns. THE COMPANY HAS BEEN
ADVISED THAT THE INDEMNIFICATION OF THE COMPANY, ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, COUNSEL AND AFFILIATES IS DEEMED TO BE VOID AS AGAINST PUBLIC
POLICY AND UNENFORCEABLE IN SOME STATES.
11
6. ARBITRATION AGREEMENT.
6.1 Subscriber represents, warrants and covenants that any controversy
or claim brought directly, derivatively or in a representative capacity by him
in his capacity as a present or former securityholder, whether against the
Company, in the name of the Company or otherwise, arising out of or relating to
any acts or omissions of the Company, or any securityholder or any of their
officers, directors, agents, affiliates, associates, employees, counsel or
controlling persons (including without limitation any controversy or claim
relating to a purchase or sale of the Securities) shall be settled by binding
arbitration under the United States Federal Arbitration Act in accordance with
the commercial arbitration rules of the American Arbitration Association ("AAA")
and judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. Any controversy or claim brought by the
Company against the Subscriber, whether in his capacity as present or former
securityholder of the Company in or against any of the Subscriber's officers,
directors, agents, affiliates, associates, employees, counsel or controlling
persons shall also be settled by arbitration under the Federal Arbitration Act
in accordance with the commercial arbitration rules of the AAA and judgment
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In arbitration proceedings under this Paragraph 6, the parties shall be
entitled to any and all remedies that would be available in the absence of this
Paragraph 6 and the arbitrators, in rendering their decision, shall follow the
substantive laws that would otherwise be applicable. This Paragraph 6 shall
apply, without limitation, to actions arising in connection with the offer and
sale of the Securities contemplated by this Agreement under any Federal, state,
foreign securities or other laws.
6.2 The arbitration of any dispute pursuant to this Paragraph 6 shall
be decided by a single arbitrator sitting in ___________.
6.3 This Paragraph 6 is intended to benefit the securityholders,
agents, affiliates, associates, employees, counsel and controlling persons of
the Company, each of whom shall be deemed to be a third party beneficiary of
this Paragraph 6, and each of whom may enforce this Paragraph 6 to the full
extent that the Company could do so if a controversy or claim were brought
against it.
6.4 Subscriber acknowledges that this Paragraph 6 limits a number of
Subscriber's rights, including without limitation (i) the right to have claims
resolved in a court of law and before a jury; (ii) certain discovery rights; and
(iii) the right to appeal any decision.
7. APPLICABLE LAW. This Agreement shall be construed in accordance with
and governed by the laws applicable to contracts made and wholly performed in
the State of ________.
8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts.
9. PERSONS BOUND. This Agreement shall, except as otherwise provided
herein, inure to the benefit of and be binding on the Company and its successors
and assigns and on each Subscriber and his respective heirs, executors,
administrators, successors and assigns.
12
10. ENTIRE AGREEMENT. This Agreement, when accepted by the Company,
will constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions, express or implied,
oral or written, except as herein contained. This Agreement may not be modified,
changed, waived or terminated other than by a writing executed by all the
parties hereto. No course of conduct or dealing shall be construed to modify,
amend or otherwise affect any of the provisions hereof.
11. ASSIGNABILITY. The Subscriber acknowledges that he may not assign
any of his rights to or interest in or under this Agreement without the prior
written consent of the Company, and any attempted assignment without such
consent shall be void and without effect.
12. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission, sent by certified, registered or
express mail, postage prepaid, or by overnight courier to the address of each
party set forth herein. Any such notice shall be deemed given when delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, three days after the date of deposit in the United States mails.
13. INTERPRETATION.
13.1 When the context in which words are used in this Agreement
indicates that such is the intent, singular words shall include the plural, and
vice versa, and masculine words shall include the feminine and neuter genders,
and vice versa.
13.2 Captions are inserted for convenience only, are not a part of this
Agreement, and shall not be used in the interpretation of this Agreement.
14. CERTIFICATION. THE SUBSCRIBER CERTIFIES THAT HE HAS READ THIS
ENTIRE SUBSCRIPTION AGREEMENT AND THAT EVERY STATEMENT MADE BY THE SUBSCRIBER
HEREIN IS TRUE AND COMPLETE.
[SIGNATURE PAGE FOLLOWS]
13
SUBSCRIBER SIGNATURE PAGE
-------------------------
The undersigned, desiring to subscribe for shares of Common Stock of
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company"), as set forth below, acknowledges that it
has received and understands the terms and conditions of the Agreement attached
hereto and that it does hereby agree to all the terms and conditions contained
therein.
IN WITNESS WHEREOF, the undersigned has hereby executed this
Subscription Agreement as of this _____ day of March, 2001.
Dollar Amount of Investment: US$___________
Number of Shares of
Common Stock Subscribed for:
Exact name(s) of Subscriber(s) (please print):
BODO, LLC
By: __________________________
Name
Title
PLEASE ATTACH CERTIFIED COPY OF AUTHORIZING CORPORATE OR TRUST DOCUMENTS
In addition, if the subscriber is a corporation, the corporate seal should be
affixed:
[SEAL]
Residence or Mailing Address:
---------------------------------
Telephone Numbers (include Area Code):
---------------------------------
Social Security or Taxpayer
Identification Number(s):
---------------------------------
Mailing Address for Correspondence
from the Company (if different from above):
---------------------------------
ACCEPTANCE OF SUBSCRIPTION
The subscription set forth herein is accepted by ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. to the
extent of US$_______ in consideration for _______ shares of Common Stock, as of
this ____ day of February, 2001.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:
------------------------------
Title:
14
ACKNOWLEDGMENT FOR CORPORATIONS
STATE OF :
-----------------------------------------
: ss:
COUNTY OF :
----------------------------------------
On this _______ day of __________ 2001, before me personally came
_____________, known to me, who, being by me duly sworn, did depose and say that
he is the __________________ of the corporation described in and which executed
the foregoing Subscription Agreement; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
Notary Public
[Seal]
My Commission Expires:
APPENDIX A
----------
INVESTOR SUITABILITY STANDARDS
A PURCHASE OF THE SHARES OF COMMON STOCK PURSUANT TO THE SUBSCRIPTION
AGREEMENT INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS OF
SUBSTANTIAL FINANCIAL MEANS WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENTS.
THE OFFER, OFFER FOR SALE, AND SALE OF THE SHARES OF COMMON STOCK ARE INTENDED
TO BE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), PURSUANT TO REGULATION D PROMULGATED THEREUNDER
("REGULATION D") OR ANOTHER EXEMPTION THEREUNDER AND ARE INTENDED TO BE EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS.
RULE 501(A) OF REGULATION D DEFINES AN "ACCREDITED INVESTOR" AS ANY
PERSON WHO COMES WITHIN ANY OF THE FOLLOWING CATEGORIES, OR WHO THE ISSUER
REASONABLY BELIEVES COMES WITHIN ANY OF THE FOLLOWING CATEGORIES, AT THE TIME OF
THE SALE OF THE SECURITIES TO THAT PERSON:
(1) ANY BANK AS DEFINED IN SECTION 3(A)(2) OF THE ACT, OR ANY SAVINGS
AND LOAN ASSOCIATION OR OTHER INSTITUTION AS DEFINED IN SECTION 3(A)(5)(A) OF
THE ACT WHETHER ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY; ANY BROKER OR
DEALER REGISTERED PURSUANT TO SECTION 15 OF THE SECURITIES EXCHANGE ACT OF 1934;
ANY INSURANCE COMPANY AS DEFINED IN SECTION 2(13) OF THE ACT; ANY INVESTMENT
COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940 OR A BUSINESS
DEVELOPMENT COMPANY AS DEFINED IN SECTION 2(A)(48) OF THAT ACT; ANY SMALL
BUSINESS INVESTMENT COMPANY LICENSED BY THE U.S. SMALL BUSINESS ADMINISTRATION
UNDER SECTION 301(C) OR (D) OF THE SMALL BUSINESS INVESTMENT ACT OF 1958; ANY
PLAN ESTABLISHED AND MAINTAINED BY A STATE, ITS POLITICAL SUBDIVISIONS, OR ANY
AGENCY OR INSTRUMENTALITY OF A STATE OR ITS POLITICAL SUBDIVISIONS, FOR THE
BENEFIT OF ITS EMPLOYEES, IF SUCH PLAN HAS TOTAL ASSETS IN EXCESS OF $5,000,000;
ANY EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, IF THE INVESTMENT DECISION IS MADE BY A PLAN FIDUCIARY, AS
DEFINED IN SECTION 3(21) OF SUCH ACT, WHICH IS EITHER A BANK, SAVINGS AND LOAN
ASSOCIATION, INSURANCE COMPANY, OR REGISTERED INVESTMENT ADVISER, OR IF THE
EMPLOYEE BENEFIT PLAN HAS TOTAL ASSETS IN EXCESS OF $5,000,000, OR, IF A
SELF-DIRECTED PLAN, WITH INVESTMENT DECISIONS MADE SOLELY BY PERSONS THAT ARE
ACCREDITED INVESTORS;
(2) ANY PRIVATE BUSINESS DEVELOPMENT COMPANY AS DEFINED IN SECTION
202(A)(22) OF THE INVESTMENT ADVISERS ACT OF 1940;
(3) ANY ORGANIZATION DESCRIBED IN SECTION 501(C)(3) OF THE INTERNAL
REVENUE CODE, CORPORATION, MASSACHUSETTS OR SIMILAR BUSINESS TRUST, OR
PARTNERSHIP, NOT FORMED FOR THE SPECIFIC PURPOSE OR ACQUIRING THE SECURITIES
OFFERED, WITH TOTAL ASSETS IN EXCESS OF $5,000,000;
(4) ANY DIRECTOR, EXECUTIVE OFFICER OR GENERAL PARTNER OF THE ISSUER OF
THE SECURITIES BEING OFFERED OR SOLD, OR ANY DIRECTOR, EXECUTIVE OFFICER OR
GENERAL PARTNER OF A GENERAL PARTNER OF THAT ISSUER;
(5) ANY NATURAL PERSON WHOSE INDIVIDUAL NET WORTH, OR JOINT NET WORTH
WITH THAT PERSON'S SPOUSE, AT THE TIME OF HIS PURCHASE EXCEEDS $1,000,000;
(6) ANY NATURAL PERSON WHO HAD AN INDIVIDUAL INCOME IN EXCESS OF
$200,000 IN EACH OF THE TWO MOST RECENT YEARS OR JOINT INCOME WITH THAT PERSON'S
SPOUSE IN EXCESS OF $300,000 IN EACH OF THOSE YEARS AND HAS A REASONABLE
EXPECTATION OF REACHING THE SAME INCOME LEVEL IN THE CURRENT YEAR;
(7) ANY TRUST WITH TOTAL ASSETS IN EXCESS OF $5,000,000, NOT FORMED FOR
THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED, WHOSE PURCHASE IS
DIRECTED BY A SOPHISTICATED PERSON AS DESCRIBED IN RULE 506(B)(2)(II); OR
(8) ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS ARE ACCREDITED
INVESTORS.
2
EXHIBIT A
FORM
OF
12% CONVERTIBLE DEMAND PROMISSORY NOTE
3
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
THE SUBJECT OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE AND THE SAME HAVE BEEN (OR WILL BE, WITH
RESPECT TO THE SECURITIES ISSUABLE UPON CONVERSION HEREOF) ISSUED IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED
UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
12% CONVERTIBLE DEMAND PROMISSORY NOTE
--------------------------------------
Orlando, Florida
February 28, 2001
FOR VALUE RECEIVED, the undersigned, ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Florida
corporation (hereinafter referred to as the "Maker"), hereby promises to pay to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Payee"), at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or
at such other place as the holder hereof may from time to time designate in
writing, in lawful currency of the United States of America, UPON DEMAND the
principal sum of Sixty Thousand dollars ($60,000.00) (the "Principal"). At the
option of the Payee, as specifically provided in Section 1 hereof, any and all
accrued interest as well as the principal due under this Note may be converted
into shares of common stock of the Maker, par value $.0001 per share, (the
"Common Stock"). The Maker further promises to pay interest to the Payee at the
above address, in like currency, accrued from the date hereof on the entire
unpaid outstanding principal amount owing hereunder from time to time until the
entire unpaid outstanding principal amount hereof is paid in full, at a rate per
annum equal to twelve percent (12%) ( the "Interest"). Interest shall be
computed on the basis of a 365-day year and shall be calculated for the actual
number of days elapsed. Payments of Interest hereunder, accrued through the date
of payment shall be payable in monthly payments: the first Interest payment
shall be due and payable on the March 28th 2001; thereafter the remaining
Payments of Interest shall be due and payable on 28th day of each month
following the date of the first Interest payment until the entire unpaid
outstanding principal amount hereof is paid in full (the "Discharge Date"). Any
payments made pursuant to this Note shall be applied first toward any fees and
costs due, then toward the Interest and then toward the Principal. By acceptance
of this 12% Convertible Promissory Note (the "Note"), the Payee represents,
warrants, covenants and agrees that it shall abide by and be bound by its terms.
1. PAYMENT, EXTENSION AND NOTICES. The unpaid principal balance
outstanding under this Note may be paid in part or in full by the Maker without
penalty, upon thirty (30) days notice to the Payee stating the repayment amount
and repayment date (the "Repayment Date"); provided that the Note is paid, in
whole or in part, pro rata in accordance with the Principal owed thereunder.
2. CONVERSION.
a. OPTIONAL CONVERSION. Up to the entire amount of the unpaid
Principal of this Note, plus accrued and unpaid Interest through the Discharge
Date, or any portion thereof, shall be convertible at the option of Payee (the
"Conversion Right") at any time or from time to time, in the manner and on the
terms hereinafter set forth, into shares of the Common Stock, at an initial
conversion price (the "Conversion Price") which shall be calculated to be the
lesser of: (i) $.001 cent for one share of Common Stock, or (ii) Conversion
Price as adjusted pursuant to Sections 4 and 11 hereof. To the extent that the
Conversion Price is decreased, the number of shares of Common Stock issuable
upon conversion of principal and interest hereunder shall be proportionately
increased.
4
3. CONVERSION PROCEDURE. The Conversion Right may be exercised by the
Payee by the surrender of this Note (along with the conversion form attached
hereto, duly executed) to the Maker at the principal office of the Maker. Hand
delivery with written acknowledgment of receipt by the Maker or registered or
certified mail by a national overnight courier service, return receipt
requested, is the preferred mode of delivery. Conversion shall be deemed to have
been effected on the date when such delivery of the conversion notice is
actually made or, if earlier, at the expiration of five (5) calendar days after
being sent to the Maker by the Payee by registered or certified mail by a
national overnight courier service, return receipt requested, with postage
thereon fully prepaid (the "Conversion Date"). As promptly as practicable
thereafter, the Maker shall issue and deliver to the Payee: (a) a new note
representing the difference between the Principal of this Note plus Interest
accrued through the Conversion Date, and the Principal hereof which has been
converted pursuant hereto; and (b) certificates representing the number of
shares of Common Stock to which the Payee is entitled. The Maker shall not be
obligated to issue certificates representing shares of Common Stock in the name
of any party other than the Payee. The person or entity in whose name the
certificates representing the shares of Common Stock issuable upon conversion
hereof shall be deemed to have become a holder of record on the next succeeding
day on which the transfer books are open, but the Conversion Price shall be that
in effect on the Conversion Date. The Maker covenants that all securities which
may be issued upon exercise of the Conversion Right will, upon issuance, be
fully paid and nonassessable and free of all taxes, liens and charges caused or
created by the Maker with respect to the issuance thereof.
4. ADJUSTMENTS. The Conversion Price and the number and kind of
securities which may be received upon the exercise of the Conversion Right shall
be subject to adjustment from time to time upon the happening of certain events,
as follows:
a. STOCK SPLITS AND COMBINATIONS. If the Maker shall at any
time or from time to time after the date hereof effect a subdivision of its
outstanding shares of Common Stock, the Conversion Price then in effect
immediately before such subdivision shall be proportionately decreased.
Conversely, if the Maker shall at any time or from time to time after the date
hereof combine its outstanding shares of Common Stock, the Conversion Price then
in effect immediately before such combination shall be proportionately
increased. Any adjustment under this section shall become effective upon the
close of business on the date the subdivision or combination becomes effective.
b. CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event that the
Maker shall at any time or from time to time after the date hereof make or
issue, or fix a record date for the determination of holders of shares of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event, the Conversion
Price then in effect shall be decreased as of the time of such issuance or, in
the event that such a record date shall have been fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in effect
by a fraction:
(i) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; and
(ii) the denominator of which shall be the sum of the total
number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date and the number of shares of Common Stock issuable in
payment of such dividend or distribution; PROVIDED, HOWEVER, that if
such record date shall have been fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price shall be recomputed accordingly as of
the close of business on such record date and thereafter such
Conversion Price shall be adjusted pursuant to this subsection as of
the time of actual payment of such dividends or distributions.
5
c. OTHER DIVIDENDS AND DISTRIBUTIONS. In the event that the
Maker at any time or from time to time after the date hereof shall make or
issue, or fix a record date for the determination of holders of shares of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Maker other than shares of Common Stock, then and in each such
event provision shall be made so that the holder of this Note shall receive,
upon conversion of this Note, in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Maker which such
holder would have received had its Note been converted into shares of Common
Stock on the date of such event and had thereafter, during the period from the
date of such event to and including the Conversion Date, retained such
securities (together with any distributions payable thereon during such period)
receivable by the holder as aforesaid during such period, giving application to
all adjustments called for during such period under this section with respect to
the rights of the holder of the Note.
d. RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. If at any time
or from time to time, there shall be a reclassification, exchange or
substitution of the shares of Common Stock, then the shares of Common Stock
issuable upon the conversion of this Note shall be changed into the same or
different number of shares of any class or classes of capital stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision
or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation or sale of assets provided for in
subsection (e) below), then and in each such event, the holder of this Note
shall have the right thereafter to convert this Note into the kind and amount of
shares of capital stock and other securities and property receivable upon such
reorganization, reclassification or other change, as the holder of the number of
shares of Common Stock into which this Note might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein; and further provided that in
no event shall the Conversion Price be increased.
e. REORGANIZATION, MERGER, CONSOLIDATION OR SALE OF ASSETS.
If, at any time or from time to time, there shall be a capital reorganization of
the shares of Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this section)
or a merger or consolidation of the Maker with or into another corporation, or
the sale of all or substantially all of the Maker's properties and assets to any
other person or entity, then as a part of such reorganization, merger,
consolidation or sale, provision shall be made so that the holder of this Note
shall thereafter be entitled to receive upon conversion of this Note, the number
of shares of capital stock or other securities or property of the Maker, or of
the successor corporation resulting from such merger or consolidation or sale,
to which the holder of shares of Common Stock deliverable upon conversion would
have been entitled on such reorganization, merger, consolidation, or sale. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this section with respect to the rights of the holder of this Note
after the reorganization, merger, consolidation or sale to the end that the
provisions of this section (including adjustment of the Conversion Price then in
effect and the number of shares of Common Stock receivable upon conversion of
this Note) shall be applicable after that event as nearly equivalent hereto as
may be practicable.
f. ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section 4(f),
the following definitions shall apply:
(A) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding (I) options granted to employees or
issued to consultants of the Maker or warrants which, in each such
case, are outstanding as of the Original Issue Date and have been
disclosed to the subscriber, or (II) options granted to employees or
consultants pursuant to stock option plans adopted by the Board of
Directors on or after the Original Issue Date.
6
(B) "ORIGINAL ISSUE DATE" shall mean the date on which this
Note was first issued.
(C) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares, rights, derivative instruments or other
securities directly or indirectly convertible into or exchangeable for
Common Stock.
(D) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
of Common Stock issued (or, pursuant to Section 4(f)(iii) below, deemed
to be issued) by the Maker after the Original Issue Date, including
shares issued upon exercise or Conversion of Options or Convertible
Securities but excluding shares of Common Stock issued or issuable:
(I) in connection with an acquisition or other
transaction by the Maker, in either in writing by the holders
of at least two-thirds (2/3) of the then outstanding principal
amount of the Notes, unless the Maker agrees to include such
issuance in the definition of Additional Shares of Common
Stock in connection with obtaining the approval of the holders
of at least a majority of the then outstanding Principal of
the Notes to such acquisition or other transaction;
(II) by reason of a dividend, stock split, split-up
or other distribution on shares of Common Stock; or
(III) upon the exercise of options excluded from the
definition of "Option" in Section 4(f)(i)(A); and
(IV) as otherwise provided in this Note.
(ii) ADJUSTMENT OF CONVERSION PRICE. If the consideration per
share (determined pursuant to Section 4(f)(v)) for an Additional Share of Common
Stock issued or deemed to be issued by the Maker is less than the Conversion
Price in effect on the date of, and immediately prior to, the issuance of such
Additional Shares of Common Stock, the Conversion Price shall be adjusted to
such lower price per share at which such Additional Shares of Common Stock are
being issued or deemed issued.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK. If the Maker at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities and the exercise of such Options therefor, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issuance or, in case such a record date shall have been fixed, as of the close
of business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 4(f)(v) hereof) of such Additional Shares of
Common Stock would be less than the Conversion Price in effect on the date of
and immediately prior to such issuance, or such record date, as the case may be,
and provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
7
(A) No further adjustment in the Conversion Price
shall be made upon the subsequent issuance of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase in the consideration payable to the Maker, or
decrease in the number of shares of Common Stock issuable,
upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issuance thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(C) No readjustment pursuant to clause (B) above
shall have the effect of increasing the Conversion Price to an
amount which exceeds the Conversion Price on the original
adjustment date; and
(D) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion
or exchange of any Option or Convertible Security, including,
but not limited to, a change resulting from the anti-dilution
provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have
obtained had the adjustment which was made upon the issuance
of such Option or Convertible Security not exercised or
converted prior to such change been made upon the basis of
such change, but no further adjustment shall be made for the
actual issuance of Common Stock upon the exercise or
conversion of any such Option or Convertible Security.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the Maker shall at any time
after the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
4(f)(iii), but excluding shares issued upon a stock split or combination as
provided in Section 4(a) or as a dividend or distribution as provided in Section
4(b) or Section 4(c)), without consideration or for a consideration per share
(determined pursuant to Section 4(f)(v) hereof) less than the Conversion Price
in effect on the date of and immediately prior to such issuance, then and in
such event, the Conversion Price shall be reduced, concurrently with such
issuance, to such lower consideration per share at which such Additional Shares
of Common Stock are being issued (or deemed issued).
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section 3(f), the consideration received by the Maker for the issuance of any
Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY. Such consideration shall:
(I) insofar as it consists of cash, be
computed at the aggregate of cash received by the
Maker, excluding amounts paid or payable for accrued
interest or accrued dividends;
(II) insofar as it consists of property
other than cash, be computed at the fair market value
thereof at the time of such issuance, as determined
in good faith by the Maker's Board of Directors; and
(III) in the event Additional Shares of
Common Stock are issued together with other shares of
securities or other assets of the Maker for
consideration which covers both, be the proportion of
8
such consideration so received, computed as provided
in clauses (I) and (II) above, as determined in good
faith by the Maker's Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Maker for Additional
Shares of Common Stock deemed to have been issued pursuant to
Section 4(f)(iii), relating to Options and Convertible
Securities, shall be determined by dividing:
(I) the total amount, if any, received or
receivable by the Maker as consideration for the
issuance of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Maker upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or
exchange of such Convertible Securities, by
(II) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
g. MINIMUM ADJUSTMENT. Notwithstanding anything to the
contrary set forth herein, no adjustment of the Conversion Price shall be made
in an amount equal to less than one tenth of one cent ($.001), but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to one cent ($.01) or more.
h. CERTIFICATE OF ADJUSTMENT. Upon the occurrence of each
adjustment or readjustment of the applicable Conversion Price pursuant to this
section, the Maker shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to the holder of this
Note a certificate, signed by the Chairman of the Board, the President or the
Chief Financial Officer, setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
i. NOTICES OF RECORD DATE. If and in the event that:
(i) the Maker shall set a record date for the purpose
of entitling the holders of shares of Common Stock to receive
a dividend, or any other distribution, payable otherwise than
in cash;
(ii) the Maker shall set a record date for the
purpose of entitling the holders of shares of Common Stock to
subscribe for or purchase any shares of any class or to
receive any other rights;
(iii) there shall occur any capital reorganization of
the Maker, reclassification of the shares of capital stock of
the Maker (other than a subdivision or combination of its
outstanding shares of Common Stock), consolidation or merger
of the Maker with or into another corporation, or sale of all
or substantially all of the assets of the Maker; or
(iv) there shall occur a voluntary or involuntary
dissolution, liquidation, or winding up of the Maker;
9
then, and in any such case, the Maker shall cause to be mailed
to the holder of record of this Note, at least thirty (30)
days prior to the dates hereinafter specified, a notice
stating the date: (A) which has been set as the record date
for the purpose of such dividend, distribution, or rights; or
(B) on which such reclassification, reorganization,
consolidation, merger, sale, dissolution, liquidation or
winding up is to take place and the record date as of which
the holder of record shall be entitled to exchange this Note
for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, sale,
dissolution, liquidation or winding up.
5. RESERVATION. The Maker covenants that, during the period within
which the Conversion Right may be exercised, the Maker will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
Conversion Right, a sufficient number of shares of Common Stock (or other
securities subject to the Conversion Right) to provide for the exercise of the
Conversion Right in full.
6. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of this Note. In lieu of any fractional shares of Common
Stock to which the Payee would otherwise be entitled, the Maker shall pay an
amount equal to the product of such fraction multiplied by the fair value of one
share of Common Stock on the Conversion Date, as determined in good faith by the
Board of Directors of the Maker.
7. REGISTRATION RIGHTS. The Maker hereby covenants and agrees as
follows:
a. DEFINITIONS. For purposes of this section:
(i) The terms "register," "registered" and
"registration" refer to a registration effected by preparing
and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration of
effectiveness of such registration statement or other document
by the Securities and Exchange Commission (the "SEC").
(ii) The term "Registrable Securities" means: (A) the
shares of Common Stock issued or issuable upon conversion of
this Note; or (B) any other securities issued as (or issuable
upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution
with respect to, in exchange for or in replacement of the
shares of Common Stock referenced in subsection (A)
immediately above, excluding in all cases, however, any
Registrable Securities sold to the public pursuant to a
registration or an exemption from registration.
(iii) The number of shares of "Registrable Securities
then outstanding" shall be the number of securities
outstanding which are Registrable Securities.
(iv) The term "Holder" as used hereinafter in this
Section means any person or entity owning of record
Registrable Securities.
b. PIGGY-BACK REGISTRATION RIGHTS. In the event that (but
without any obligation to do so) the Maker proposes to register any of its
securities under the Securities Act in connection with the public offering of
such securities solely for cash (other than a registration on Form ▇-▇, ▇▇▇▇ ▇-▇
or any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities), the Maker shall promptly give each Holder written
notice of such registration (the "Piggy-Back Notice"). Upon the written request
of each Holder given within twenty (20) days after receipt of such Piggy-Back
Notice from the Maker, the Maker shall, subject to the provisions of Subsection
6(h) below, cause to be included in the registration statement filed by the
10
Maker under the Securities Act all of the Registrable Securities that each such
Holder has requested to be registered; PROVIDED, HOWEVER, that the Maker shall
have no such obligation if such registration statement relates to an
underwritten offering by the Maker and the managing underwriter of the subject
offering has expressed its objection to the same to the Maker. To the extent
that a Holder is offered the opportunity hereunder to include all of its
Registrable Securities in a registration statement, such Holder will be deemed
to have exercised its sole piggy-back registration right provided by this
Subsection 6(c).
c. OBLIGATIONS OF THE MAKER. Whenever required under this
section to file a registration statement to effect the registration of any
Registrable Securities, the Maker shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of at
least fifty percent (50%) of the Registrable Securities
registered thereunder, keep such registration statement
effective for at least nine (9) months.
(ii) Prepare and file with the SEC such amendments
and supplements to such registration statement and the
prospectus included therein as may be necessary to comply with
the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration
statement.
(iii) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned
by them.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under the
securities laws of such jurisdictions as shall be reasonably
requested by the Holders for the distribution of the
securities covered by the registration statement, provided
that the Maker shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file
a general consent to service of process in any such
jurisdiction.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement with terms generally satisfactory to the managing
underwriter of such offering.
(vi) Notify the Holders promptly after the Maker
shall have received notice thereof, of the time when the
registration statement becomes effective or any supplement to
any prospectus forming a part of the registration statement
has been filed.
(vii) Notify the Holders of any stop order suspending
the effectiveness of the registration statement and use its
reasonable best efforts to remove such stop order.
d. FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Maker to take any action pursuant hereto that any Holder
seeking to include any of its Registrable Securities in a registration statement
filed by the Maker pursuant hereto shall furnish to the Maker such information
regarding itself, the Registrable Securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of its Registrable Securities. In that connection, each such Holder
shall be required to represent to the Maker that all such information which is
given is both complete and accurate in all material respects. Each of such
Holders shall deliver to the Maker a statement in writing from the beneficial
owners of such securities of such beneficial owners' bona fide intend to sell,
transfer or otherwise dispose of such securities.
11
e. DEFINITION OF EXPENSES.
(i) "REGISTRATION EXPENSES" shall mean all expenses
incurred by the Maker in complying with Sections 7(c) and 7(d)
hereof, including without limitation, all registration and
filing fees, printing expenses, fees and disbursements of
counsel for the Maker, blue sky fees and expenses, and the
expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular
employees of the Maker which shall be paid in any event by the
Maker).
(ii) "SELLING EXPENSES" shall mean all underwriting
discounts, selling commissions and underwriters' expense
allowance applicable to the sale and all fees and
disbursements of any special counsel (other than the Maker's
regular counsel) for any Holder.
g. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
herewith, shall be borne by the Maker, and all Selling Expenses shall be borne
by the Holders of the securities so registered pro rata on the basis of the
number of Registrable Securities so registered; PROVIDED, HOWEVER, that the
Maker shall not be required to pay any Registration Expenses if, as a result of
the withdrawal from registration by Holders, the registration statement does not
become effective. In the case of such withdrawal and the failure of the Holders
to agree so to forfeit, the Holders shall bear such Registration Expenses pro
rata on the basis of the number of Registrable Securities so included in the
registration request.
h. UNDERWRITING REQUIREMENTS. All Holders proposing to
distribute their securities through an underwriting pursuant hereto shall
(together with the Maker and any other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Maker. Notwithstanding any other provision of this section, at the request of
the managing underwriter, the Holder shall delay the sale of Registrable
Securities which such Holder has requested be registered under this section for
the thirty (30) day period commencing with the effective date of the
registration statement.
i. DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this section.
j. INDEMNIFICATION. In the event that any Registrable
Securities are included in a registration statement pursuant hereto:
(i) To the extent permitted by law, the Maker will
indemnify and hold harmless each Holder, the officers, directors and partners of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person or entity, if any, that controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (A) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto; (B) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
12
statements therein not misleading; or (C) any violation or alleged violation by
the Maker of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act or
any state securities law; and the Maker will reimburse each such Holder,
officer, director or partner, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Maker (which consent
shall not be unreasonably withheld), nor shall the Maker be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person;
and further provided, however, that the foregoing indemnity agreement is subject
to the condition that, insofar as it relates to any untrue statement, alleged
untrue statement, omission or alleged omission made in any preliminary
prospectus but eliminated or remedied in the definitive prospectus, such
indemnity agreement shall not inure to the benefit of the underwriter (or the
benefit of any person or entity that controls such underwriter), if a copy of
the definitive prospectus was not sent or given to such person or entity with or
prior to the confirmation of the sale of such securities to such person or
entity.
(ii) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Maker, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Maker within the meaning of the Securities Act or the Exchange
Act, any underwriter (within the meaning of the Securities Act) for the Maker,
any person who (or entity that) controls such underwriter, and any other Holder
selling securities in such registration statement or any of its directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Maker or any such
director, officer, controlling person (or entity), or underwriter or controlling
person, or other such Holder or director, officer or controlling person may
become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Maker or any
such director, officer, controlling person (or entity), underwriter or
controlling person (or entity), other Holder, officer, director or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld.
(iii) Within five (5) calendar days after receipt by
an indemnified party under this Section 7(j) of notice of the commencement of
any action (including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 7(j), notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly notified, to assume the defense thereof with
counsel selected by the indemnifying party, which counsel shall be satisfactory
to the indemnified party or parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with reasonable fees and
expenses thereof to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to notify an indemnifying party within a reasonable time
of the commencement of any such action, to the extent prejudicial to its ability
to defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 7(j), but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 7(j).
13
k. TERMINATION OF THE MAKER'S OBLIGATIONS.
(i) Notwithstanding any provision hereof to the
contrary, the Maker shall not be required to effect any registration under the
Securities Act or under any state securities laws on behalf of any Holder or
Holders if, in the opinion of counsel for the Maker, the offering or transfer by
such Holder or Holders in the manner proposed (including, without limitation,
the number of shares proposed to be offered or transferred and the method of
offering or transfer) is exempt from the registration requirements of the
Securities Act and the securities laws of applicable states.
8. MISCELLANEOUS.
a. RESTRICTED SECURITIES. By acceptance hereof, the Payee
understands and agrees that this Note and the shares of Common Stock issuable
upon conversion hereof are "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Maker in a transaction not
involving a public offering and have not been the subject of registration under
the Securities Act and that under such laws and applicable regulations such
securities may be resold in the absence of registration under the Securities Act
only in certain limited circumstances. The Payee hereby represents that it is
familiar with Rule 144 promulgated under the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
b. LEGENDS. It is understood that this Note and each
certificate evidencing shares of Common Stock issuable upon conversion hereof
(or evidencing any other securities issued with respect thereto pursuant to any
stock split, stock dividend, merger or other form of reorganization or
recapitalization) shall bear the legend (in addition to any legends which may be
required in the opinion of the Maker's counsel by the securities laws of the
state where the Payee is located) substantially as set forth on the first page
of this Note.
c. PRESENTMENT. Except as set forth herein, Maker waives
presentment, demand and presentation for payment, notice of nonpayment and
dishonor, protest and notice of protest and expressly agrees that this Note or
any payment hereunder may be extended from time to time by the Payee without in
any way affecting the liability of Maker.
9. NOTICES.
a. NOTICES TO THE PAYEE. Any notice required by the provisions
of this Note to be given to the holder hereof shall be in writing and may be
delivered by personal service, facsimile transmission, by registered or
certified mail, return receipt requested, with postage thereon fully prepaid or
overnight delivery courier. All such communications shall be addressed to the
Payee at the following address: ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇.
b. NOTICES TO THE MAKER. Whenever any provision of this Note
requires a notice to be given or a request to be made to the Maker by the Payee
or the holder of any other security of the Maker obtained in connection with a
recapitalization, merger, dividend or other event affecting this Note, then and
in each such case, any such notice or request shall be in writing and shall be
delivered by personal service, facsimile transmission, by registered or
certified mail, return receipt requested, with postage thereon fully prepaid or
overnight delivery courier to the Maker at its principal place of business at
the following address: 1000 Universal ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, ATTN: President.
14
c. Service of any such communication made only by mail shall
be deemed complete on the date of actual delivery as shown by the addressee's
registry or certification receipt or at the expiration of the third (3rd)
business day after the date of mailing, whichever is earlier in time.
No notice given or request made hereunder shall be valid unless signed by the
Payee of this Note or other holder giving such notice or request (or, in the
case of a notice or request by Holders of a specified percent in aggregate
principal amount of outstanding Notes, unless signed by each Holder of a Note
whose Note has been counted in constituting the requisite percentage of Notes
required to give such notice or make such request).
10. EVENTS OF DEFAULT.
a. Each of the following shall constitute an event of default
(an "Event of Default") hereunder: (i) the failure to pay when due any principal
or interest hereunder; (ii) the violation by the Maker of any covenant or
agreement contained in this Note; (iii) an assignment for the benefit of
creditors by the Maker; (iv) the application for the appointment of a receiver
or liquidator for the Maker or for property of the Maker; (v) the filing of a
petition in bankruptcy by or against the Maker; (vi) the issuance of an
attachment or the entry of a judgment against the Maker in excess of $5,000;
(vii) a default by the Maker with respect to any other indebtedness; (viii) the
making or sending of a notice of an intended bulk sale by the Maker; (ix) the
termination of existence, the dissolution or the insolvency of the Maker; or (x)
a default in any guaranty of the monetary amounts payable pursuant to this Note.
Upon the occurrence of any of the foregoing Events of Default, the Holder shall
give written notice to the Maker of such default, and Maker shall have ten (10)
days within which to cure such default. If the default is not cured within the
ten (10) day cure period, then (a) this Note shall be considered to be in
default and the entire unpaid principal sum hereof, together with accrued
interest, shall at the option of the holder hereof become immediately due and
payable in full; and (b) the Conversion Price shall be the lesser of the
Conversion Price in effect at the time of the Event of Default or seventy
percent (70%) of the original Conversion Price. Upon the occurrence of an Event
of Default which remains uncured as set forth herein and the placement of this
Note in the hands of an attorney for collection, the Maker agrees to pay
reasonable collection costs and expenses, including reasonable attorneys' fees
and interest from the date of the default at the rate of eighteen percent (18%)
per annum computed on the unpaid principal balance. In the event that an Event
of Default continues past the last day of any month and for each and every month
that such Event of Default shall continue, the Conversion Price in effect on
such last day of the prior month shall be reduced by five percent (5%).
b. The Payee may waive any Event of Default hereunder. Such
waiver shall be evidenced by written notice or other document specifying the
Event or Events of Default being waived and shall be binding on all existing or
subsequent Payees under this Note.
10. SURVIVAL. In the event that all or a portion of the principal or
accrued interest hereunder is converted pursuant to Section 1 above, Section 6
hereof shall survive the termination of this Note upon cancellation hereof
resulting from repayment of the balance of amounts outstanding hereunder or the
issuance of a new note pursuant to Section 1 above.
11. CONSTRUCTION; GOVERNING LAW. The validity and construction of this
Note and all matters pertaining hereto are to be determined in accordance with
the laws of the State of Florida without regard to the conflicts of law
principles thereof.
15
IN WITNESS WHEREOF, Maker, by its appropriate officers thereunto duly
authorized, has executed this convertible promissory note and affixed its
corporate seal as of this 28th of February, 2001.
ATTEST: ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: By:
---------------------------- ------------------------------------------
Secretary ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
16
CONVERSION FORM
The undersigned hereby elects to convert the following principal and
interest amount of the attached 12% Convertible Promissory Note (the "Note")
into shares of Common Stock of the Maker:
State such amount: _____________________________________ ($___________).
Conversion Price (per share): $____________
Number of Shares: ______________
Signature:
Date:
------------------- ---------------------------------------------
(Sign exactly as your name appears on the Note)
17