NEITHER THIS NOTE, NOR THE COMMON STOCK INTO WHICH IT MAY BE CONVERTED, HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY
STATE SECURITIES ACT, AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING
OF THE 1933 ACT. NEITHER, THIS NOTE, NOR THE COMMON STOCK INTO WHICH IT MAY BE
CONVERTED, MAY BE TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED
UNLESS REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT NO VIOLATION OF THE REGISTRATION PROVISIONS OF
THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS, SHALL RESULT FROM THE
PROPOSED TRANSFER.
XXXXXXX COMMUNICATIONS CORPORATION
CONVERTIBLE NOTE
due May 29, 2003
$__________ May 29, 2000
Cedar Rapids, Iowa
FOR VALUE RECEIVED, the undersigned, XXXXXXX COMMUNICATIONS
CORPORATION, an Iowa corporation (the "Company"), hereby promises to pay to the
order of ___________________________________ or its registered permitted assigns
(the "Holder"), the principal sum of __________________________ Dollars
($___________) on May 29, 2003, together with interest (computed on the basis of
a 360-day year of twelve 30 day months) on the unpaid principal at a rate of 12%
per annum, from the date hereof until this Note is paid in full. Accrued
interest on this Note shall be payable at maturity. If any payment on this Note
becomes due and payable on a day other than a business day, the maturity thereof
shall be extended to the next succeeding business day and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.
This Note is one of the Notes of the Company described in the Offering
Circular of the Company dated May 10, 2000.
1. Payments. Payments of principal of and interest on this Note
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shall be mailed and addressed to the Holder hereof at the address shown on the
register maintained by the Company for such purpose in lawful money of the
United States of America. Payments under this Note shall be deemed made three
business days after deposit of such payments in the U.S. mail postpaid.
2. Conversion.
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(a) At any time and from time to time prior to the payment in
full of the principal amount of this Note, the Holder may, subject to the terms
of this Note, convert all or any portion of the then outstanding principal of
this Note, together with any accrued but unpaid interest thereon, into such
whole number of shares (the "Shares") of the Company's no par value common stock
(the "Stock"), as is obtained by dividing the outstanding principal amount of
the Note (or the portion of the outstanding principal amount of the Note being
converted), together with any accrued but unpaid interest thereon, by the
Conversion Price (as defined below). Such conversion shall be effective upon
the receipt by the Company of (i) written notice of conversion specifying the
principal amount of the Note, together with any accrued but unpaid interest
thereon, to be converted and (ii) this Note. Promptly upon the effectiveness of
the conversion, the Company will issue and deliver to the Holder duly executed
certificates for fully paid and nonassessable shares of the Stock representing
the number of Shares to which the Holder is entitled pursuant to such conversion
(bearing such legends as are deemed appropriate under applicable state and
federal securities laws in the opinion of counsel to the Company).
(b) If, at any time, the Holder is converting less than the
full amount due under this Note, the Company shall issue to the Holder a
replacement Note for the amount due under this Note less the amount converted.
(c) Upon the Holder's surrender of the Note to be converted
from time to time, the rights of the Holder of the Note being converted shall
cease with respect to that portion of the Note being converted except for the
right to receive Shares and accrued but unpaid interest and a replacement Note
in accordance herewith, and the Holder shall be treated for all purposes as
having become the record holder of such Shares at such time.
(d) For purposes of this Note, the "Conversion Price" shall
be an amount equal to $3.03 per Share, as adjusted from time to time pursuant to
paragraphs (e), (f) and (g) below.
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(e) In the event the Company should at any time or from time
to time after the date of issuance of this Note fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Stock or the
holders of Stock entitled to receive a dividend or other distribution payable in
additional shares of Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Stock (the "Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Stock or Stock Equivalents
(including the additional shares of Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend,
distribution, split or subdivision if no record date is fixed), the Conversion
Price of this Note shall be appropriately decreased so that the number of shares
of Stock issuable upon conversion of this Note shall be increased in proportion
to such increase of the outstanding shares of Stock. Notwithstanding anything
herein to the contrary, the Conversion Price of this Note will not be adjusted
with respect to any dividend on any shares of the Company's preferred stock paid
in the form of Stock.
(f) If the number of shares of Stock outstanding at any time
after the date hereof is decreased by a combination of the outstanding shares of
Stock, a reverse stock split or similar transaction, then, following the record
date of such transaction, the Conversion Price for this Note will be
appropriately increased so that the number of shares of Stock issuable in
conversion of this Note will be decreased in proportion to the decrease in
outstanding shares of Stock.
(g) Any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the Company's
assets to another person or entity which is effected in such a way that holders
of Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities, cash or assets with respect to or in exchange
for Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the Company will make appropriate provisions
to insure that the Holder will thereafter have the right to acquire and receive,
in lieu of or in addition to (depending on whether holders of Stock will retain
or relinquish their Stock as part of such Organic Change) the Shares immediately
theretofore acquirable and receivable upon the conversion of this Note, such
shares of stock, securities, cash or assets as such Holder would have received
in connection with such Organic Change if such Holder had converted this Note to
Shares immediately prior to such Organic Change. In addition, the Company will
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor corporation (if other than the Company)
resulting from the consolidation or merger or the corporation purchasing such
assets assumes by written instrument (in form reasonably satisfactory to the
Holder), the obligation to deliver to each such Holder such shares of stock,
securities, cash or assets as, in accordance with the foregoing provision, such
Holder may be entitled to acquire.
3
(h) Immediately upon any adjustment of the Conversion Price
and any change in the rights of the Holder by reason of the events set forth in
paragraphs (e), (f) or (g), then and in each such case, the Company will
promptly cause its chief financial officer to deliver to the Holder a
certificate stating the adjusted Conversion Price, or specifying the other
shares of stock, securities or assets and the amount thereof receivable as a
result of such change in rights, and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Company will also give written notice to the Holder within five days after the
Company's board of directors authorizes (a) any dividend or distribution upon
Stock, (b) any pro rata subscription offer to holders of Stock or (c) any
Organic Change or any dissolution, liquidation or winding-up of the Company;
provided, however, that such notice shall in any event be not less than ten days
before any record date of the Stock with respect to such transaction or event.
(i) In connection with the conversion of this Note, no
fractions of Shares shall be issued, but in lieu thereof the Company shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the current market price per share of
Stock on the day on which the Note is deemed to have been converted. The good
faith determination of the current market price per share of Stock by the
Company's Board of Directors shall be conclusive.
3. Redemption. This Note is subject to redemption, in whole
----------
or in part, at the option of the Company upon not less than 20 nor more than 60
days' prior written notice to the Holder. Such notice shall specify the
redemption date and provide instructions to the Holder regarding the surrender
of this Note for redemption and the payment of the redemption price. The
Company may redeem all or part of this Note at a redemption price equal to 100%
of the outstanding principal amount being redeemed, together with accrued and
unpaid interest, to the redemption date. This Note (or the portion thereof) for
whose redemption and payment provision is made shall cease to bear interest from
and after the redemption date. If, at any time, the Company is redeeming less
than the full principal amount of this Note, the Company shall issue to the
Holder a replacement Note, for the principal amount of this Note outstanding
less the principal amount redeemed. Notwithstanding the foregoing, the Holder
may elect to convert this Note into Shares pursuant to Section 2 above by
delivering a notice of conversion prior to the redemption date.
4. Cancellation of Note. After all amounts due under this Note
----------------------
have been paid in full, this Note will be surrendered to the Company for
cancellation and will not be reissued.
4
5. Reservation of Shares. The Company shall at all times reserve
----------------------
and keep available out of its authorized and unissued Stock, solely for the
purpose of effecting the conversion of the Note, such number of shares of Stock
as shall from time to time be sufficient to effect the conversion of the amount
of the Note outstanding.
6. Events of Default. The occurrence of any of the following
-------------------
events shall constitute an Event of Default under this Note (an "Event of
Default"):
(a) the Company defaults in the payment of any principal
owing in respect of the Note when the same shall become due; or
(b) the Company defaults in the payment of any interest owing
in respect of the Note when the same shall become due, and such default shall
continue for a period of 15 days; or
(c) the Company (i) makes an assignment for the benefit of
creditors, files a petition in bankruptcy, petitions or applies to any tribunal
for the appointment of a custodian, receiver or any trustee for it or a
substantial part of its assets; (ii) commences any proceedings under any
bankruptcy, reorganization, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; (iii) has filed against it any
such petition or application in which an order for relief is entered or which
remains undismissed for a period of 60 days or more; or (iv) indicates its
consent to, approval of or acquiescence in any such petition, application or
proceeding or order of relief or the appointment of a custodian, receiver or
trustee for it or a substantial part of its properties or shall suffer any
custodianship, receivership or trusteeship to continue undischarged for a period
of 60 days or more.
If an Event of Default shall occur, (i) the full unpaid principal
amount of this Note shall, subject to the terms set forth below, automatically
be due and payable without any declaration, notice, presentment, protest or
demand of any kind (all of which are hereby waived), and (ii) the unpaid
principal balance hereof and on any unpaid interest hereon shall accrue interest
at a rate of 18% per annum during the continuance of such Event of Default to
the extent permitted by applicable law, until the same shall be paid or until
such Event of Default shall be cured.
No delay or omission on the part of Holder in exercising any
right or option given to Holder shall impair such right or option or be
considered as a waiver thereof or acquiescence in any default hereunder.
5
The Company hereby waives presentment, demand, notice of dishonor
and protest and consents to any and all extensions and renewals hereof without
notice.
7. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of Iowa, without regard to any conflicts
of laws statutes or principles.
8. Payment of Expenses to Enforce Note. In the event of any
----------------------------------------
action at law or suit in equity in respect of this Note, the Company, in
addition to all other sums which the Company may be required to pay, will pay
Holder's costs and expenses, including reasonable attorneys' fees, incurred in
connection with such suit or action.
9. Rights and Liabilities as Shareholder. Except as specified
-----------------------------------------
herein or as otherwise agreed by the Company and the Holder, the Holder shall
have no rights or liabilities as a shareholder of the Company until and to the
extent of the conversion of this Note pursuant to Section 2 of this Note.
XXXXXXX COMMUNICATIONS CORPORATION
BY
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