Exhibit 1.1
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERTIBLE PROMISSORY NOTE
---------------------------
April 15, 2003
FOR VALUE RECEIVED, PARENTECH, INC. (the "Borrower" or the "Company")
hereby promises to pay to the order of ____________ (the "Lender"), or its
designee or assignee, by April 15, 2008 the principal sum of ________THOUSAND
DOLLARS ($__,000.00) , together with interest on the unpaid principal balance at
the rate of five (5%) percent per annum, as provided below.
1. Payment Terms. The outstanding principal balance and accrued
interest shall be due and payable on or before April 15, 2008.
2. Conversion of Note.
a) Optional Conversion. The Note may be converted at any
time at the option of the Lender into Four Thousand
(4000) shares of the Company's common stock for each
$1,000.00 in principal loaned plus that number of
common shares of the Company determined by dividing
the then outstanding accrued but unpaid interest due
on this Note, if any, by $0.25 (the "Optional
Conversion Shares").
b) Automatic Conversion Upon Qualified Financing. In the
event that subsequent to the date of this Note the
Company effects the closing of a sale of its shares
of capital stock or securities convertible into
shares of capital stock for cash in an equity
financing in an amount of at least One Million
Dollars ($1,000,000) (the "Qualified Financing"),
then all of the principal and accrued interest then
outstanding on this Note shall automatically convert
into the greater of:
i. that number of shares of: (a) the Company's
common stock or (b) convertible securities
to be sold in such Qualified Financing,
determined by dividing the per share price
in effect in the Qualified Financing into
the then outstanding principal amount and
accrued interest on the Note (the "Automatic
Conversion Shares"); or
ii. Six Thousand (6000) shares of the Company's
common stock.
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c) Mandatory Conversion. The note will automatically
convert into Four Thousand (4000) shares of the
Company's common stock plus that number of common
shares determined by dividing the then outstanding
accrued but unpaid interest, if any, by $0.25 (the
"Mandatory Conversion Shares"), if, at any time that
the promissory note is outstanding, the closing sale
price of the common stock of the Company, as traded
on the Over-the-Counter Bulletin Board, is in excess
of $0.50 per share for at least 10 consecutive
business days.
The Optional Conversion Shares, the Automatic Conversion
Shares or the Mandatory Conversion Shares (in any case, the "Conversion
Shares"), shall be validly issued, non-assessable and free and clear of
any liens, claims or encumbrances. The Lender, as owner of the
Conversion Shares, shall become a party to all stock purchase, investor
rights and other related agreements of the Company and shall be
accorded the same rights, preferences and privileges and be subject to
the same restrictions and objections as other parties subscribing for
the capital stock (or convertible securities) in the Qualified
Financing. Notwithstanding anything to the contrary herein, the Company
may, at its option, elect to pay all accrued interest on this Note,
rather than have such accrued interest be converted as provided for in
this Section 2. In the event of such conversion, the Borrower shall
promptly thereafter deliver certificates representing the Conversion
Shares to the Lender. Whether or not such certificates are delivered,
from and after the closing of the conversion described in this Section
2, the Lender shall be deemed to be the owner of the number of fully
paid, validly issued and nonassessable of the Conversion Shares. Upon
such conversion of this Note: (i) the Lender shall surrender this Note
to the Company, and (ii) the Company shall be deemed to have paid this
Note in full, and the Company shall be forever released from all of its
obligations under, this Note. No fractional shares will be issued upon
conversion of this Note and, in lieu thereof, the Company shall pay to
the Lender the amount of the outstanding principal not so converted.
3. Event of Default. The entire unpaid principal amount of this Note,
together with all accrued interest thereon, shall, at the option of the Lender,
forthwith become due and payable, without notice or demand of any kind, all of
which are hereby expressly waived, upon the occurrence of any of the following
events:
(a) if there is a default in the payment of the principal of
and/or interest on the Note in accordance with the terms hereof or in the due
observance or performance of any of the conditions, covenants or agreements
contained herein and such default is not cured with ten (10) days;
(b) if the Company shall admit in writing its inability to pay
its debts generally as they become due;
(c) if the Company shall become insolvent, or shall be
adjudicated bankrupt;
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(d) if bankruptcy, insolvency, arrangement, debt adjustment,
or receivership proceedings, in which the Company is alleged to be insolvent or
unable to pay its debts as they mature, shall be instituted by or against the
Company, and the Company shall consent to the same or admit in writing the
material allegations of the petition filed in such proceedings; or if such
proceedings shall not be dismissed within 30 days after their institution or
within such additional period of time as the Company shall reasonably request,
provided the Company is diligently and in good faith prosecuting such dismissal;
(e) if the Company shall make an assignment for the benefit of
creditors;
(f) if there is a material and adverse change, taken as a
whole, in the Company's financial position or business and affairs; or
(g) if there is a default under any of the documents creating
any indebtedness of the Company and by reason of such default such indebtedness
is accelerated or the Company is required to make any payments other than those
which would have been due in the absence of such default.
4. Remedies. In case any one or more of the events specified in Section
3 hereof shall have occurred and be continuing, the Lender may proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
whether for the specific performance of any covenant or agreement contained in
this Note or in aid of the exercise of any power granted in this Note, or the
Company may proceed to enforce the payment of all sums due upon this Note or to
enforce any other legal or equitable right of the Company.
5. Payment of Costs and Expenses. If an action is instituted to collect
this Note, the Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys' fees) incurred by the Lender in order to
collect the amounts due hereunder or to protect its interests hereunder.
6. Waiver of Presentment and Notice of Dishonor. The Borrower and all
others who may at any time be liable hereon in any capacity, jointly and
severally, waive any requirement of presentment, demand for payment, protest,
notice of dishonor, notice of acceleration, notice of protest, or further notice
or demand of any kind.
7. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by overnight courier or
first class registered or certified mail, return receipt requested, postage
prepaid, addressed to such party at the address set forth below or such other
address as may hereafter be designated in writing by the addressee to the
addressor listing all parties:
(a) If to the Company, to:
Parentech, Inc.
000 X. Xxxxxxx 000, Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxx or Xxxxxxx X. Xxxxxxx, MD
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(b) If to the Lender:
All such notices and communications shall be deemed to have been given in the
case of (a) personal delivery on the date of such delivery, (b) overnight
courier on the day following delivery to such courier and (c) mailing on the
third day after the posting thereof.
8. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflict of laws principals.
9. Binding Effect; Successor and Assigns. This Note shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, provided that the Borrower may not sell or
assign or transfer any of its interest hereunder without the prior written
consent of the Lender, its successors or assigns.
10. Severability. If any term, condition, or provision of this Note
shall be held to be invalid, illegal or unenforceable in any respect, then in
such event the remainder of this Note shall not be affected thereby and it shall
remain in full force and effect except with respect to such term, condition, or
provision.
11. Amendments; No Waiver. Failure of the Lender to insist upon the
strict performance of any term, provision or covenant of this Note, or to
exercise any option or election conferred, shall not be deemed to be a waiver or
relinquishment of any future breach of any such term, covenant, condition,
election or option. No provision of this Note may be waived, modified or
discharged orally, by course of dealing or otherwise, without a writing signed
by the party to be charged with such waiver, modification or discharge.
12. Transfer of this Note or Securities Issuable on Conversion Hereof.
This Note may not be transferred in violation of any restrictive legend set
forth hereon. Each new Note issued upon transfer of this Note shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Securities Act of 1933, as amended (the "Act"), unless in
the opinion of counsel for Company such legend is not required in order to
ensure compliance with the Act. Company may issue stop transfer instructions to
its transfer agent in connection with such restrictions. Subject to the
foregoing, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of Company. Prior to presentation of
this Note for registration of transfer, Company shall treat the registered
holder hereof as the owner and holder of this Note for the purpose of receiving
all payments of principal and interest hereon and for all other purposes
whatsoever, whether or not this Note shall be overdue and Company shall not be
affected by notice to the contrary.
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13. Compliance with Law. The Company and the Lender intend to contract
in compliance with all state and federal usury laws governing this Note. The
Company and the Lender agree that none of the terms of this Note shall be
construed as a contract for, or requirement to pay interest at a rate in excess
of, the maximum interest rate allowed by any applicable state or federal usury
laws. If the Lender receives sums which constitute interest that would otherwise
increase the effective interest rate on the Note to a rate in excess of that
permitted by any applicable law, then all such sums constituting interest in
excess of the maximum lawful rate shall, at Lender's option, either be credited
to the payment of principal or returned to the Company.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
and delivered by its agent thereunto duly authorized, as of the date first
written above.
Parentech, Inc.
By: _____________________________
Name: Xxxxx X. Xxxxxx
Title: President
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APPENDIX A
Warrant
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER SUCH ACT, OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
Xx. 0 Xxxxx 00, 0000
XXXXXXX TO PURCHASE COMMON sTOCK
OF
Parentech, inc.
(Void after April 15, 2008)
FOR VALUE RECEIVED, subject to the terms and conditions herein set forth,
___________________________, ("Holder" as defined below) is entitled to purchase
from Parentech, Inc., a Delaware corporation (the "Company"), at any time before
the termination of this Warrant pursuant to Section 11 below, at a price per
share equal to the Warrant Price (as defined below), __________shares, (the
Warrant Stock as defined below).
Definitions. As used in this Warrant, the following terms shall have
the definitions ascribed to them below:
"Holder" shall mean the Holder of the Convertible Promissory
Note of which this Warrant is attached to as Exhibit A (the "Accompanying
Convertible Promissory Note") or his assigns.
"Securities" shall mean shares of the Company's common stock.
"Warrant Exercise Price" shall be $0.25 per share for each
$1.00 of principal loaned by the Holder under the Accompanying Convertible
Promissory Note.
"Warrant Stock" shall mean the Securities purchasable upon
exercise of this Warrant (Four (4) shares for every $1.00 of principal loaned by
the Holder under the Accompanying Convertible Promissory Note) or issuable upon
conversion of this Warrant (Two (2) shares for every $1.00 of principal loaned
by the Holder under the Accompanying Convertible Promissory Note, pursuant to
Section 5 below and subject to adjustment as described in Section 7 below.
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Fractional Shares. No fractional shares shall be issuable upon exercise
or conversion of the Warrant and the number of shares to be issued shall be
rounded down to the nearest whole share. .
No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.
Reservation of Stock. The Company will reserve from its authorized and
unissued common stock a sufficient number of shares to provide for the issuance
of Warrant Stock upon the exercise or conversion of this Warrant. Issuance of
this Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
Exercise of Warrant. This Warrant may be exercised by:
the surrender of this Warrant, together with the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Attachments 1 and 2, respectively, duly completed and executed at the principal
office of the Company and accompanied by payment in full of the Warrant Price
($250.00 for each $1,000.00 of principal loaned under the Accompanying
Convertible Promissory Note) in cash or by check with respect to the shares of
Warrant Stock being purchased. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
shares of Warrant Stock issuable upon such exercise shall be treated for all
purposes as the Holder of such shares of record as of the close of business on
such date. As promptly as practicable after such date, the Company shall issue
and deliver to the person or persons entitled to receive the same a certificate
or certificates for the number of full shares of Warrant Stock issuable upon
such exercise; or
the surrender of this Warrant, together with the Notice of
Conversion and Investment Representation Statement in the forms attached hereto
as Attachments 2 and 3, respectively, duly completed and executed at the
principal office of the Company will entitle the Holder to receive Two Thousand
(2000) shares of the Company's common stock for each $1,000.00 loaned under the
Accompanying Convertible Promissory Note (subject to adjustment as defined under
(6) below.
Adjustment of Exercise Price and Number of Shares. The number of shares
issuable upon exercise of this Warrant (or any shares of stock or other
securities or property at the time receivable or issuable upon exercise of this
Warrant) and the Warrant Price therefor are subject to adjustment upon the
occurrence of the following events:
Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Warrant Price and the number of shares issuable upon
exercise of this Warrant shall each be proportionally adjusted to reflect any
stock dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event altering the number of
outstanding shares of the Company's capital stock.
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Adjustment for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the shares payable in securities of the Company then, and in each
such case, the Holder, on exercise of this Warrant at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Warrant Stock (or such other stock or securities) issuable on
such exercise prior to such date, the securities of the Company to which such
Holder would have been entitled upon such date if such Holder had exercised this
Warrant immediately prior thereto (all subject to further adjustment as provided
in this Warrant).
Adjustment for Capital Reorganization, Consolidation, Merger. If any
capital reorganization of the capital stock of the Company, or any consolidation
or merger of the Company with or into another company, or the sale of all or
substantially all of the Company's assets to another company shall be effected
in such a way that holders of the Company's capital stock will be entitled to
receive stock, securities or assets with respect to or in exchange for the
Company's capital stock, and in each such case the Holder, upon the exercise of
this Warrant, at any time after the consummation of such capital reorganization,
consolidation, merger, or sale, shall be entitled to receive, in lieu of the
stock or other securities and property receivable upon the exercise of this
Warrant prior to such consummation, the stock or other securities or property to
which such Holder would have been entitled upon such consummation if such Holder
had exercised this Warrant immediately prior to the consummation of such capital
reorganization, consolidation, merger, or sale, all subject to further
adjustment as provided in this Section 7; and in each such case, the terms of
this Warrant shall be applicable to the shares of stock or other securities or
property receivable upon the exercise of this Warrant after such consummation.
"Market Stand-Off" Agreement. Holder hereby agrees that in connection
with any underwritten public offering by the Company, during the period of
duration (not to exceed 180 days) specified by the Company and an underwriter of
common stock of the Company following the effective date of the Registration
Statement of the Company filed under the Securities Act of 1933, as amended (the
"Act"), with respect to such offering, Holder will not, to the extent requested
by the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase, pledge or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by
Holder at any time during such period. If requested by such underwriter, Holder
agrees to execute a lock-up agreement in such form as the underwriter may
reasonably propose.
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Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof in whole only, provided that (i) the transferor provides, at the
Company's request, an opinion of counsel satisfactory to the Company that such
transfer does not require registration under the Act and the securities law
applicable with respect to any other applicable jurisdiction, and (ii) the
Company, in its sole discretion, consents to such assignment or transfer.
Termination. This Warrant shall terminate and no longer by exercisable
at upon the earlier of (i) 5:00 p.m. California time, on April 15, 2008.
Miscellaneous. This Warrant shall be governed by the laws of the State
of California, as such laws are applied to contracts to be entered into and
performed entirely in California by California residents. The headings in this
Warrant are for purposes of convenience and reference only, and shall not be
deemed to constitute a part hereof. Neither this Warrant nor any term hereof may
be changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company in writing by the last Holder of this Warrant who shall have furnished
an address to the Company in writing, and if mailed shall be deemed given three
days after deposit in the United States mail.
By: ______________________________
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Attachment 1
NOTICE OF EXERCISE
TO: Parentech, Inc.
1. The undersigned hereby elects to purchase ________________ shares of
the Warrant Stock of Parentech, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
(Address)
------------------------------------ ------------------------------------
(Date) (Name of Warrant Holder)
By:
--------------------------------
Title:
-----------------------------
------------------------------------
SSN/EIN of Warrant Holder
Attachment 2
------------
INVESTMENT REPRESENTATION STATEMENT
Shares of the Securities
(as defined in the attached Warrant) of
Parentech, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Parentech, Inc. (the "Company") as follows:
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(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control. By executing this Statement, the undersigned
further represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Act, and applicable state securities laws, on the ground that the issuance of
such securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering, and
that the Company's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and Company's counsel to the
effect that (A) appropriate action necessary for compliance with the Act and any
applicable state securities laws has been taken or an exemption from the
registration requirements of the Act and such laws is available, and (B) the
proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market makers" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
--------------------------------- --------------------------------------
(Date) (Name of Warrant Holder)
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
SSN/EIN of Warrant Holder
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Attachment 3
------------
NOTICE OF CONVERSION
TO: PARENTECH, INC.
1. The undersigned hereby elects to acquire ________________ shares of
the Warrant Stock of Parentech, Inc., pursuant to the terms of the attached
Warrant, by conversion of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
----------------------------------
(Name)
----------------------------------
(Address)
--------------------------------- --------------------------------------
(Date) (Name of Warrant Holder)
By:
-----------------------------------
Title:
--------------------------------
--------------------------------------
SSN/EIN of Warrant Holder
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