THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO VIANET
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE NOTE
FOR VALUE RECEIVED, VIANET TECHNOLOGIES, INC., a Delaware corporation
(hereinafter called "Borrower"), hereby promises to pay to ______________,
________________________________ (the "Holder") or order, without demand, the
sum of _______________________ Dollars ($________), with simple interest
accruing at the annual rate of 8%, on January 9, 2002 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten
(10) day grace period to pay any monetary amounts due under this Note, after
which grace period a default interest rate of 20% per annum shall apply to the
amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set
forth in Article II shall remain in full force and effect immediately from the
date hereof and until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to
convert, interest payable on this Note shall accrue at the annual rate of eight
percent (8%) and be payable March 31, 2001 and quarterly thereafter, and on the
Maturity Date, accelerated or otherwise, when the principal and remaining
accrued but unpaid interest shall be due and payable, or sooner as described
below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal
amount and interest due under this Note into Shares of the Borrower's Common
Stock as set forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the
issuance of this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note, and/or at the
Holder's election, the interest accrued on the Note, (the date of giving of such
notice of conversion being a "Conversion Date") into fully paid and
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nonassessable shares of common stock of Borrower as such stock exists on the
date of issuance of this Note, or any shares of capital stock of Borrower into
which such stock shall hereafter be changed or reclassified (the "Common Stock")
at the conversion price as defined in Section 2.1(b) hereof (the "Conversion
Price"), determined as provided herein. Upon delivery to the Company of a Notice
of Conversion as described in Section 9 of the subscription agreement entered
into between the Company and Holder relating to this Note (the "Subscription
Agreement") of the Holder's written request for conversion, Borrower shall issue
and deliver to the Holder within five business days from the Conversion Date
that number of shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. At the election of the Holder, the Company will
deliver accrued but unpaid interest on the Note through the Conversion Date
directly to the Holder on or before the Delivery Date (as defined in the
Subscription Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal (and interest, at the election of the Holder) of the Note to be
converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per share shall be the lower of: (i) $.21 ("Maximum
Base Price"); or (ii) eighty (80%) of the average of the three lowest closing
bid prices for the Common Stock on the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, NASDAQ National Market System, American Stock Exchange, or New York
Stock Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock, the "Principal Market"), or if not then
trading on a Principal Market, such other principal market or exchange where the
Common Stock is listed or traded for the fifteen (15) trading days prior to but
not including the Conversion Date.
(c) The Maximum Base Price described in Section 2.1(b)(i)
above and number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets, etc. If the Borrower at any
time shall consolidate with or merge into or sell or convey all or substantially
all its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note, as to
the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such number and kind of
securities as would have been issuable as the result of such change with respect
to the Common Stock immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
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in shares of Common Stock, the Conversion Price shall be proportionately reduced
in case of subdivision of shares or stock dividend or proportionately increased
in the case of combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.
D. Share Issuance. Subject to the provisions of this
Section, if the Borrower at any time shall issue any shares of Common Stock
prior to the conversion of the entire principal amount of the Note (otherwise
than as: (i) provided in Sections 2.1(c)A, 2.1(c)B or 2.1(c)C or this
subparagraph D; (ii) pursuant to options, warrants, or other obligations to
issue shares, outstanding on the date hereof as described in the Reports and
Other Written Information, as such terms are defined in the Subscription
Agreement (which agreement is incorporated herein by this reference); or (iii)
Excepted Issuances, as defined in Section 12(a) of the Subscription Agreement;
[(i), (ii) and (iii) above, are hereinafter referred to as the "Existing Option
Obligations"] for a consideration less than the Conversion Price that would be
in effect at the time of such issue, then, and thereafter successively upon each
such issue, the Conversion Price shall be reduced as follows: (i) the number of
shares of Common Stock outstanding immediately prior to such issue shall be
multiplied by the Conversion Price in effect at the time of such issue and the
product shall be added to the aggregate consideration, if any, received by the
Borrower upon such issue of additional shares of Common Stock; and (ii) the sum
so obtained shall be divided by the number of shares of Common Stock outstanding
immediately after such issue. The resulting quotient shall be the adjusted
conversion price. Except for the Existing Option Obligations, for purposes of
this adjustment, the issuance of any security of the Borrower carrying the right
to convert such security into shares of Common Stock or of any warrant, right or
option to purchase Common Stock shall result in an adjustment to the Conversion
Price upon the issuance of shares of Common Stock upon exercise of such
conversion or purchase rights.
(d) During the period the conversion right exists, Borrower
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full conversion
of this Note. Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. Xxxxxxxx agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the
Holder in whole or in part as described in Section 2.1(a) hereof and the
Subscription Agreement. Upon partial conversion of this Note, if requested by
the Holder, a new Note containing the same date and provisions of this Note
shall be issued by the Borrower to the Holder for the principal balance of this
Note and interest which shall not have been converted or paid.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default
("Event of Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, all without demand, presentment
or notice, or grace period, all of which hereby are expressly waived, except as
set forth below:
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3.1 Failure to Pay Principal or Interest. The Borrower
fails to pay any installment of principal or interest hereon when due and such
failure continues for a period of ten (10) days after the due date. The ten (10)
day period described in this Section 3.1 is the same ten (10) day period
described in Section 1.1 hereof.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of seven (7) days after
written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement entered into by the Holder and Borrower in connection with this Note,
or in any agreement, statement or certificate given in writing pursuant hereto
or in connection therewith shall be false or misleading in any material respect.
3.4 Receiver or Trustee. The Borrower shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.
3.5 Judgments. Any money judgment, writ or similar final
process shall be entered or filed against Borrower or any of its property or
other assets for more than $50,000, and shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower and if instituted against Borrower are not dismissed within 45 days of
initiation.
3.7 Delisting. Delisting of the Common Stock from a
Principal Market or such other principal exchange on which the Common Stock is
listed for trading; Borrower's failure to comply with the conditions for
listing; or notification that the Borrower is not in compliance with the
conditions for such continued listing.
3.8 Concession. A concession by the Borrower, after
applicable notice and cure periods, under any one or more obligations in an
aggregate monetary amount in excess of $50,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market
trading suspension for longer than five (5) trading days.
3.10 Failure to Deliver Common Stock or Replacement Note.
Xxxxxxxx's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 9 of the Subscription Agreement,
or if required a replacement Note.
3.11 Non-Registration Event. The occurrence of a
Non-Registration Event as described in Section 10.4 of the Subscription
Agreement.
3.12 Cross Default. A default by the Borrower of a material
term, covenant, warranty or undertaking of any other agreement to which the
Borrower and Holder are parties, or the occurrence of an event of default under
any such other agreement.
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ARTICLE IV
SECURITY INTEREST
4.1 Security Interest/ Waiver of Automatic Stay. This Note
is, as of the date hereof, secured by a security interest granted to Holder
pursuant to a Security Agreement delivered by Borrower to Holder. The Borrower
acknowledges and agrees that should a proceeding under any bankruptcy or
insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Holder should be entitled to,
among other relief to which the Holder may be entitled under the Note, Security
Agreement, Subscription Agreement and any other agreement to which the Borrower
and Holder are parties, (collectively "Loan Documents") and/or applicable law,
an order from the court granting immediate relief from the automatic stay
pursuant to 11 U.S.C. Section 362 to permit the Holder to exercise all of its
rights and remedies pursuant to the Loan Documents and/or applicable law. THE
BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C.
SECTION 362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT
NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR
OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF
THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND/OR APPLICABLE LAW. The Borrower hereby consents to any motion for relief
from stay which may be filed by the Holder in any bankruptcy or insolvency
proceeding initiated by or against the Borrower and, further, agrees not to file
any opposition to any motion for relief from stay filed by the Holder. The
Borrower represents, acknowledges and agrees that this provision is a specific
and material aspect of the Loan Documents, and that the Holder would not agree
to the terms of the Loan Documents if this waiver were not a part of this Note.
The Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to be represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has had the opportunity to discuss this waiver with counsel.
The Borrower further agrees that any bankruptcy or insolvency proceeding
initiated by the Borrower will only be brought in courts within the geographic
boundaries of New York State.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay
on the part of Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.2 Notices. Any notice herein required or permitted to be
given shall be in writing and may be personally served or sent by fax
transmission (with copy sent by regular, certified or registered mail or by
overnight courier). For the purposes hereof, the address and fax number of the
Holder is as set forth on the first page hereof. The address and fax number of
the Borrower shall be Vianet Technologies, Inc., 0000 Xxxxxxxxx Xxxxx, Xxxxx
59
160, Plano, Texas 75024, telecopier number: (000) 000-0000. Both Xxxxxx and
Borrower may change the address and fax number for service by service of notice
to the other as herein provided. Notice of Conversion shall be deemed given when
made to the Company pursuant to the Subscription Agreement.
5.3 Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.
5.4 Assignability. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the benefit of the
Holder and its successors and assigns, and may be assigned by the Holder.
5.5 Cost of Collection. If default is made in the payment
of this Note, Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees.
5.6 Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New
York or in the federal courts located in the state of New York. Both parties and
the individual signing this Agreement on behalf of the Borrower agree to submit
to the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney's fees and costs.
5.7 Maximum Payments. Nothing contained herein shall be
deemed to establish or require the payment of a rate of interest or other
charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded to
the Borrower.
5.8 Prepayment. This Note may not be paid prior to the
Maturity Date without the consent of the Holder except as described in Section
9.6 of the Subscription Agreement.
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IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be signed in its
name by its Chief Executive Officer on this _____ day of January, 2001.
VIANET TECHNOLOGIES, INC.
By:
------------------------
WITNESS:
-------------------------------
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by VIANET TECHNOLOGIES,
INC. on January 9, 2001 into Shares of Common Stock of VIANET TECHNOLOGIES, INC.
(the "Company") according to the conditions set forth in such Note, as of the
date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
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