Contract
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE ”ACT”),
OR
ANY STATE SECURITIES LAWS. NO INTEREST IN THIS NOTE MAY BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE
144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT), OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAWS WHERE PAYEE
HAS FURNISHED TO THE COMPANY AN OPINION OF ITS COUNSEL THAT AN REGISTRATION
IS
NOT REQUIRED.
ASKMENOW,
INC.
12%
JUNIOR CONVERTIBLE PROMISSORY NOTE
|
$________________
|
____________,
2007
|
FOR
VALUE
RECEIVED, the undersigned, AskMeNow, Inc., a Delaware corporation (the
“Company”
or
“Payor”),
having its executive office and principal place of business at 00 Xxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxx, XX 00000, hereby promises to pay to
_____________________, a _______________ with its principal place of business
at
__________________ (the “Payee”)
at
such address for Payee (or at such other place as Payee may from time to time
hereafter direct by notice in writing to Payor), the principal sum of
______________ Dollars ($_____), together with interest at the Note Rate set
forth in Section 2 on the principal balance outstanding from time to time.
Any
or all amounts of the amounts outstanding under this 12% Junior Convertible
Promissory Note (this “Note”),
including principal and accrued interest, are convertible into shares of the
Company’s capital stock in accordance with Section 3 hereof.
This
Note is
being issued in connection with a bridge financing (the “Bridge
Offering”)
by the
Company on a “best efforts” no minimum basis, up to a maximum of $1,000,000 of
Bridge Offering units (each a “Bridge
Unit”).
Each
Bridge Unit consists of $1.00 principal amount of 12% Junior Convertible
Promissory Notes and Warrants to purchase Three (3) shares of common stock,
$.01
par value, of the Company at $.50 per share (the “Common
Stock”),
to be
offered on a “best efforts” basis. The Bridge Offering is being made only to
investors who qualify as “accredited investors” as such term is defined in Rule
501 of Regulation D under the Securities Act of 1933, as amended (the
“Act”).
Partial Bridge Units may be sold by the Company in its sole discretion.
All
of the
proceeds of the Bridge Offering will be used by the Company for general
corporate purposes, including working capital.
1. Maturity
Date.
Subject
to the provisions of Section 3 below, the entire outstanding balance of this
Note, including principal and unpaid accrued interest thereon (together, the
“Note
Balance”),
will
be due and payable in a single instalment on _______, 2008 (270 days following
the issue date of this Note) (the “Maturity
Date”).
Notwithstanding the foregoing, the Maturity Date may be extended by an
additional 90 days from the Maturity Date to _________, 2008 (the “Extended
Maturity Date”)
upon
delivery by the Company of written notice thereof to the Payee no later than
12:00 P.M. EST on the business day immediately preceding the Maturity
Date.
2. Interest
And Payment; Prepayment.
2.1 The
principal amount of this Note outstanding from time to time shall bear simple
interest at the annual rate (the “Note
Rate”)
of
twelve (12%) percent from the date hereof through the date of repayment or
conversion, payable upon such date of repayment or conversion, as applicable.
2.2 The
principal amount of this Note may be prepaid in whole at any time, or in part
from time to time, without penalty or premium, together with unpaid interest
thereon.
2.3 All
payments made by the Payor on this Note, including all prepayments, shall be
applied first to the payment of accrued unpaid interest on this Note and then
to
the reduction of the unpaid principal balance of this Note.
2.4 All
payments made by the Payor on this Note shall be made in such currency of the
United States as shall be legal tender for the payment of public and private
debts at the time of payment, at the address of the Payee set forth above,
or at
such other place as the Payee shall have designated in advance in writing to
the
Payor.
2.5 In
the
event that the date for the payment of any amount payable under this Note falls
due on a Saturday, Sunday or public holiday under the laws of the State of
California, the time for payment of such amount shall be extended to the next
succeeding business day and interest at the Note Rate shall continue to accrue
on any principal amount so effected until the payment thereof on such extended
due date.
3. Conversion.
3.1 Optional
Conversion at Any Time.
At the
option of the Payee exercised by written notice to the Company at any time
while
this Note remains outstanding, all but not less than all of the Note Balance
may
be converted into shares of the Company’s Common Stock, at a per share price
equal to $.50 per share, with the same rights and preferences as the currently
issued and outstanding shares of Common Stock. The number of shares of Common
Stock to which the Payee will be entitled upon conversion of this Note pursuant
to this Section 3.1 will be determined by dividing the dollar amount of the
Note
Balance on the Conversion Date (as defined below) by $.50 per share.
3.2 Optional
Conversion at Qualified Investment.
If a
person, business entity, or group of persons or business entities acting in
concert (the “Qualified
Investor”),
acting after the date hereof and before the Maturity Date or Extended Maturity
Date, as applicable, acquires, in a single arms-length transaction or in a
series of related arms-length transactions, shares of the Company’s common
stock, $.01 par value (the “Common
Stock”)
or
other equity securities of the Company convertible into or exercisable for
Common Stock, for an aggregate consideration valued at Five Million Dollars
($5,000,000) or more (the “Qualified
Investment”),
then
at the same time the Qualified Investor pays the consideration for the Qualified
Securities (as defined below), the Payee may elect by written notice thereof
to
the Company to convert all but not less than all of the Note Balance into
securities that are the same series and with the same rights and preferences
as
the equity securities purchased by the Qualified Investor (the “Qualified
Securities”),
at a
per share price equal to the per share sale price paid by the Qualified Investor
(the “Conversion
Price”).
For
these purposes, any equity securities of the Company issued in respect of this
Note and any other Notes issued in the Bridge Offering of which this Note is
a
part shall not be counted towards the aforesaid Five Million Dollars
($5,000,000). The number of Qualified Securities to which the Payee will be
entitled upon conversion of this Note pursuant to this Section 3.2 will be
determined by dividing the dollar amount of the Note Balance on the Conversion
Date by the Conversion Price.
2
3.3 Mechanics
of Conversion; No Fractional Shares.
In the
event of a conversion pursuant to this Section 3, the Company covenants and
agrees to take any and all actions that may be reasonably necessary or desirable
in order to issue the Qualified Securities or Common Stock under the terms
and
conditions of this Note. Before the Payee shall be entitled to receive a
certificate for the shares of the Qualified Securities or Common Stock into
which this Note has been converted, the Payee shall surrender this Note duly
endorsed, at the office of the Company, and shall execute and deliver to the
Company all other agreements requested by the Company which relate to the
Qualified Securities or Common Stock. The Company shall, as soon as reasonably
practicable thereafter, and in any event within ten (10) business days of the
date of conversion, issue and deliver to the Payee, at the address specified
by
the Payee, a certificate or certificates for the Qualified Securities or Common
Stock to which the Payee shall be entitled. No fractional shares shall be issued
upon conversion of this Note and the number of Qualified Securities or Common
Stock to be issued shall be rounded to the nearest whole share. Any conversion
pursuant to this Section 3 shall be deemed effective as of immediately prior
to
the close of business on the date on which the applicable conversion notice
is
delivered, and this Note is surrendered, by the Payee to the Company (the
“Conversion
Date”).
4. No
Rights as Shareholder.
Nothing
contained in this Note shall be construed as conferring upon the Payee or its
permitted transferees, prior to the conversion of this Note, the right to vote,
receive dividends, consent or receive notice as a shareholder in respect of
any
meeting of shareholders for the election of directors of the Company or of
any
other matter, or any other rights as a shareholder of the Company.
5. Replacement
Of Note.
5.1 In
the
event that this Note is mutilated, destroyed, lost or stolen, Payor shall,
at
its sole expense, execute, register and deliver a new Note, in exchange and
substitution for this Note, if mutilated, or in lieu of and substitution for
this Note, if destroyed, lost or stolen. In the case of destruction, loss or
theft, Payee shall furnish to Payor indemnity reasonably satisfactory to Payor,
and in any such case, Payee shall also furnish to Payor evidence to its
reasonable satisfaction of the mutilation, destruction, loss or theft of this
Note and of the ownership thereof. Any replacement Note so issued shall be
in
the same outstanding principal amount as this Note and dated the date to which
interest shall have been paid on this Note or, if no interest shall have yet
been paid, dated the date of this Note.
5.2 Every
Note issued pursuant to the provisions of Section 5.1 above in substitution
for
this Note shall constitute a contractual obligation of the Payor, whether or
not
this Note shall be found at any time or be enforceable by anyone.
3
6. Covenants
of Payor.
Payor
covenants and agrees that, so long as this Note remains outstanding and unpaid,
in whole or in part:
6.1 Payor
will not sell, transfer or dispose of a material part of its assets;
6.2 Payor
will not make any loan to any person who is or becomes a shareholder or
executive employee of Payor, other than for reasonable advances for expenses
in
the ordinary course of business;
6.3 Payor
will promptly pay and discharge all lawful taxes, assessments and governmental
charges or levies imposed upon it, its income and profits, or any of its
property, before the same shall become in default, as well as all lawful claims
for labor, materials and supplies which, if unpaid, might become a lien or
charge upon such properties or any part thereof; provided,
however,
that
Payor or such subsidiary shall not be required to pay and discharge any such
tax, assessment, charge, levy or claim so long as the validity thereof shall
be
contested in good faith by appropriate proceedings and Payor or such subsidiary,
as the case may be, shall set aside on its books adequate reserves (if required
by generally accepted accounting principles) with respect to any such tax,
assessment, charge, levy or claim so contested;
6.4 Payor
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchises and
substantially comply with all laws applicable to Payor as its counsel may
advise;
6.5 Payor
will at all times maintain, preserve, protect and keep its property used or
useful in the conduct of its business in good repair, working order and
condition (except for the effects of reasonable wear and tear in the ordinary
course of business) and will, from time to time, make all necessary and proper
repairs, renewals, replacements, betterments and improvements
thereto;
6.6 Payor
will keep adequately insured, by financially sound reputable insurers, all
property of a character usually insured by similar corporations and carry such
other insurance as is usually carried by similar corporations;
6.7 Payor
will, promptly following the occurrence of an Event of Default or of any
condition or event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default, furnish a statement of Xxxxx’s Chief
Executive Officer or Chief Financial Officer to Payee setting forth the details
of such Event of Default or condition or event and the action which Payor
intends to take with respect thereto;
6.8 Payor
will, and will cause each of its subsidiaries to, at all times maintain books
of
account in which all of its financial transactions are duly recorded in
conformance with generally accepted accounting principles;
4
6.9 Payor
shall not create, incur, assume or suffer to exist any pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, or security interest,
mortgage, deed of trust, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (except for liens for taxes not yet due and payable or being
contested in good faith, mechanics’ materialmen’s or similar liens, and liens
securing rental or lease payments, together the “Permitted
Liens”)
with
respect to the assets of Payor or such subsidiary; and
6.10 Payor
shall not issue any debt, equity or other instrument which would give the holder
thereof, directly or indirectly, a right in any assets of Payor or such
subsidiary that are pari passu, senior or superior to any right of the Payee
in
or to such assets.
7. Events
of Default.
If
any of
the following events (each an “Event
of Default”)
occurs:
7.1 The
dissolution of Payor or any vote in favor thereof by the board of directors
and
shareholders of Payor;
7.2 Payor
makes an assignment for the benefit of creditors, or files with a court of
competent jurisdiction an application for appointment of a receiver or similar
official with respect to it or any substantial part of its assets, or Payor
files a petition seeking relief under any provision of the Federal Bankruptcy
Code or any other federal or state statute now or hereafter in effect affording
relief to debtors, or any such application or petition is filed against Payor,
which application or petition is not dismissed or withdrawn within thirty (30)
days from the date of its filing;
7.3 Payor
fails to pay the principal amount, or interest on, or any other amount payable
under, this Note within ten (10) days of the date such amount becomes due and
payable;
7.4 Payor
admits in writing its inability to pay its debts as they mature;
7.5 Payor
sells all or substantially all of its assets or merges or is consolidated with
or into another corporation, other than a merger with or into a publicly traded
corporation or a merger to change Payor’s jurisdiction of
incorporation;
7.6 A
proceeding is commenced to foreclose a security interest or lien in any property
or assets of Payor as a result of a default in the payment or performance of
any
debt (in excess of $50,000 and secured by such property or assets) of Payor
or
of any subsidiary of Payor;
7.7 A
final
judgment for the payment of money in excess of $50,000 is entered against Payor
by a court of competent jurisdiction, and such judgment is not discharged (nor
the discharge thereof duly provided for) in accordance with its terms, nor
a
stay of execution thereof procured, within thirty (30) days after the date
such
judgment is entered, and, within such period (or such longer period during
which
execution of such judgment is effectively stayed), an appeal therefrom has
not
been prosecuted and the execution thereof caused to be stayed during such
appeal;
7.8 An
attachment or garnishment is levied against the assets or properties of Payor
or
any subsidiary of Payor involving an amount in excess of $50,000 and such levy
is not vacated, bonded or otherwise terminated within thirty (30) days after
the
date of its effectiveness;
5
7.9 Payor
defaults in the due observance or performance of any covenant, condition or
agreement on the part of Payor to be observed or performed pursuant to the
terms
of this Note (other than the default specified in Section 7.3 above) and such
default continues uncured for a period of thirty (30) days;
7.10 Payor
creates, incurs, assumes or suffers to exist any pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, or security interest,
mortgage, deed of trust, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (except permitted Liens) with respect to the assets of Payor or
such
subsidiary; or
7.11 If
Payor
issues any debt, equity or other instrument which would give the holder thereof,
directly or indirectly, a right in any assets of Payor or such subsidiary that
are senior or superior to any right of the Payee in or to such
assets.
8. Suits
for Enforcement and Remedies.
Upon the
occurrence of an Event of Default and Payor’s failure to cure such default, the
Payee shall have the right, at Payee’s option, to declare the Note Balance to be
forthwith due and payable, and, in the case of an Event of Default pursuant
to
Section 7.3 above, the Payee shall automatically be entitled to full and
immediate payment of all amounts due under this Note without any action on
the
part of or declaration by Payee required. If any one or more Events of Default
shall occur and be continuing, the Payee further may proceed to (i) protect
and enforce Payee’s rights either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, condition or
agreement contained in this Note or in any agreement or document referred to
herein or in aid of the exercise of any power granted in this Note or in any
agreement or document referred to herein, (ii) enforce the payment of this
Note, or (iii) enforce any other legal or equitable right of Payee. No
right or remedy herein or in any other agreement or instrument conferred upon
Payee is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and shall be in addition to
every
other right and remedy given hereunder or now or hereafter existing at law
or in
equity or by statute or otherwise.
9. Unconditional
Obligation; Fees, Waivers, Other.
9.1 The
obligations to make the payments provided for in this Note are absolute and
unconditional and not subject to any defense, set-off, counterclaim, rescission,
recoupment or adjustment whatsoever.
9.2 If,
following the occurrence of an Event of Default, Payee shall seek to enforce
the
collection of any amount of principal of and/or interest on this Note, there
shall be immediately due and payable from Payor, in addition to the then unpaid
principal of, and accrued unpaid interest on, this Note, all costs and expenses
incurred by Payee in connection therewith, including, without limitation,
reasonable attorneys’ fees and disbursements.
9.3 No
forbearance, indulgence, delay or failure to exercise any right or remedy with
respect to this Note shall operate as a waiver or as an acquiescence in any
default, nor shall any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
6
9.4 This
Note
may not be modified or discharged (other than by payment or exchange) except
by
a writing duly executed by Xxxxx and Payee; provided
that no
material provision of this Note may be amended without the written consent
of
the Company and the holders of at least one-half of the aggregate principal
amount of all of the Notes issued in the Bridge Offering to which this Note
relates.
9.5 Payor
hereby expressly waives demand and presentment for payment, notice of
nonpayment, notice of dishonor, protest, notice of protest, bringing of suit,
and diligence in taking any action to collect amounts called for hereunder,
and
shall be directly and primarily liable for the payment of all sums owing and
to
be owing hereon, regardless of and without any notice, diligence, act or
omission with respect to the collection of any amount called for hereunder
or in
connection with any right, lien, interest or property at any and all times
which
Payee had or is existing as security for any amount called for hereunder.
10. Restriction
on Transfer.
This
Note has been acquired for investment, and this Note has not been registered
under the securities laws of the United States of America or any state thereof,
including the Act. Accordingly, no interest in this Note may be offered for
sale, sold or transferred in the absence of registration and qualification
of
this Note, under applicable federal and state securities laws, including the
Act, or an opinion of counsel of Payee reasonably satisfactory to Payor that
such registration and qualification are not required.
11. Subordination.
The
rights of the Payee hereunder in and to the assets of the Company are hereby
expressly subordinated to the rights in and to such assets of the holders of
the
Company’s Senior Indebtedness, as hereinafter defined. Senior Indebtedness shall
mean those certain 12% Senior Promissory Notes issued by the Company in its
$3,000,000 best efforts, no minimum bridge offering completed in May 2007.
Subject to the rights of the holders of Senior Indebtedness, nothing contained
in this Section 11 shall impair, as between the Payor and the Payee, the
obligation of the Payor, subject to the terms and conditions hereof, to pay
to
the Payee the principal hereof and interest hereon as and when the same become
due and payable, or shall prevent the Payee, upon default hereunder, from
exercising all rights, powers and remedies otherwise provided herein or by
applicable law.
12. Piggyback
Registration Rights.
If, at
any time during the two-year period commencing with the issuance of this Note,
the Payor proposes or is required to file a registration statement registering
any shares of Common Stock or securities convertible into or exchangeable for
Common Stock (other than on Form S-4 or Form S-8, or such other forms as the
U.S. Securities and Exchange Commission may hereafter promulgate for
registration of securities in transactions for which Form S-4 or Form S-8 may
be
used as of the date hereof), whether or not for its own account, the Payor
shall
give at least 20 days prior written notice to the Payee of its intention to
do
so. Upon written request by the Payee within 10 days after receipt of such
notice, the Payor shall use its commercially reasonable efforts to include
in
the securities to be registered by such registration statement all shares of
Common Stock issued or issuable upon conversion of this Note (which registration
right with respect to such conversion shares shall be in addition to any
registration rights with respect to any shares underlying that certain Warrant,
dated as of the date hereof, issued by the Payor to the Payee in connection
with
Xxxxx’s participation in the Bridge Offering) that the Payee indicates in such
notice that the Payee desires to sell, subject to the following terms and
conditions: (i) if such registration statement is for a prospective underwritten
offering, the Payee shall agree to (a) enter into an underwriting agreement,
if
required, in customary form with the underwriter or underwriters selected by
the
Company, and (b) sell the Payee’s securities, if the Company so requests, on the
same basis and upon the same terms as the other securities covered by such
registration statement, other than securities proposed to be registered by
the
holders of the Preferred Stock (as defined below), and provided
that if
the number of shares requested by the Payee to be registered in such offering
exceeds the amount of shares which the underwriters reasonably believe is
compatible with the success of such underwritten offering, the Company shall
only be required to include in such offering that number of shares requested
to
be registered by the Payee as the underwriters believe will not jeopardize
the
success of such offering, provided,
however
that any
such decrease in the number of shares sought to be registered by the Payee
shall
occur on a pari
passu
basis
with the other shares being registered, other than any shares proposed to be
registered by the holders of the Preferred Stock; (ii) if the number of shares
the Payor is able to register is limited due to Rule 415 or other SEC shelf
registration rules, Payor shall only be required to register the shares Payee
elects to convert on a pari
passu
basis
with the other shares being registered, other than any shares proposed to be
registered by the holders of the Preferred Stock; and (iii) the Payor may
withdraw any such registration statement before it becomes effective or postpone
the offering of securities contemplated by such registration statement without
any obligation to the Payee or any other Payee. The Payor shall have exclusive
control over the preparation and filing of any registration statement proposed
to be filed under this Section 12 as well as any amendments and supplements
thereto and the withdrawal or revocation thereof. The Payor’s obligations
pursuant to this Section 12 are subject to the Payee’s cooperation with respect
to any such proposed registration, including but not limited to the provision
of
such information as may reasonably be requested by the Payor, the underwriter(s)
or any other authorized parties and the execution and delivery of such
agreements (including indemnification and contribution agreements), instruments
and documents as may be reasonably requested thereby, and the Payee’s compliance
with all applicable laws. The Payor shall pay all reasonable expenses incurred
in connection with the registration contemplated hereby, including without
limitation registration and filing fees, printing expenses, and fees and
expenses of counsel for the Payor. Notwithstanding the foregoing, underwriting
discounts and commissions and transfer taxes relating to the Payee’s registered
securities included in any registration hereunder, and all fees and expenses
for
counsel to the Payee, shall be borne and paid by the Payee. The registration
rights and other rights granted in this Section 12 are not assignable, in whole
or in part, without the prior written consent of the Payor. Notwithstanding
anything to the contrary set forth herein, the Payee hereby expressly agrees
and
acknowledges that any registration rights of the Payee hereunder are subordinate
to those of the holders of the Company’s 10% (PIK) Series A Preferred Stock and
the Company’s 10% (PIK) Series B Preferred Stock (together, the “Preferred
Stock”) and warrants issued to such holders in connection with the purchase and
sale of the Preferred Stock.
7
13. Miscellaneous.
13.1 The
headings of the various paragraphs of this Note are for convenience of reference
only and shall in no way modify any of the terms or provisions of this
Note.
13.2 All
notices required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered or sent by
registered or certified mail (return receipt requested, postage prepaid),
facsimile transmission or overnight courier to the address of the intended
recipient as set forth in the preamble to this Note or at such other address
as
the intended recipient shall have hereafter given to the other party hereto
pursuant to the provisions of this Note. Any such notice shall be deemed
received (i) in the case of personal delivery or delivery by facsimile, on
the
date of such delivery, (ii) in the case of overnight courier, on the next
business day following when sent, and (iii) in the case of mailing, on the
third
business day following the date on which the notice was
post-marked.
13.3 This
Note
and the obligations of Payor and the rights of Payee shall be governed by and
construed in accordance with the substantive laws of the State of California
without giving effect to the choice of laws rules thereof.
13.4 This
Note
shall bind Payor and its successors and assigns. Neither the Payor nor the
Payee
may assign this Note without the prior written consent of the other party,
provided
that
under no circumstances may the Payee assign this Note to any individual or
entity that is a competitor, directly or indirectly, with the
Payor.
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ASKMENOW,
INC.
|
|||
|
By:
|
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|
Name:
|
Xxxxxx
Xxxxx
|
||
|
Title:
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CEO
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8
