EXHIBIT 4.2
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 MOBILE REACH
INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
----------------
FOR VALUE RECEIVED, MOBILE REACH INTERNATIONAL, INC., a Delaware
corporation (hereinafter called "Borrower"), hereby promises to pay to (the
"Holder") or order, without demand, the sum of Seventy-Five Thousand Dollars
($75,000.00), with simple interest accruing on April 1, 2006 (the "Maturity
Date"), if not paid sooner.
This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder, dated of even date herewith (the
"Subscription Agreement"), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:
ARTICLE I
GENERAL 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 fifteen percent (15%) 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 regardless of the occurrence of an Event of
Default. The Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article II hereof.
1.3 Interest Rate. Simple interest payable on this Note shall accrue at the
annual rate of eight percent (8%) commencing from the issue date of this Note
and will be payable, at the Borrower's election, in cash or shares of Common
Stock valued at the Conversion Price, upon each Conversion, June 1, 2005 and
semi-annually 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.
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 MOBILE REACH
INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
----------------
FOR VALUE RECEIVED, MOBILE REACH INTERNATIONAL, INC., a Delaware
corporation (hereinafter called "Borrower"), hereby promises to pay to (the
"Holder") or order, without demand, the sum of Fifty Thousand Dollars
($50,000.00), with simple interest accruing on April 1, 2006 (the "Maturity
Date"), if not paid sooner.
This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder, dated of even date herewith (the
"Subscription Agreement"), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:
ARTICLE I
GENERAL 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 fifteen percent (15%) 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 regardless of the occurrence of an Event of
Default. The Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article II hereof.
1.3 Interest Rate. Simple interest payable on this Note shall accrue at the
annual rate of eight percent (8%) commencing from the issue date of this Note
and will be payable, at the Borrower's election, in cash or shares of Common
Stock valued at the Conversion Price, upon each Conversion, June 1, 2005 and
semi-annually 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 due under this
Note into Shares of the Borrower's Common Stock, $.0001 par value per share
("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 date of 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 accrued
interest, at the election of the Holder (the date of giving of such notice of
conversion being a "Conversion Date") into fully paid and nonassessable shares
of Common Stock as such stock exists on the date of issuance of this Note, or
any shares of capital stock of Borrower into which such Common Stock shall
hereafter be changed or reclassified, at the conversion price as defined in
Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein.
Upon delivery to the Borrower of a completed Notice of Conversion, a form of
which is annexed hereto, Borrower shall issue and deliver to the Holder within
three (3) business days from the Conversion Date (such third day being the
"Delivery Date") that number of shares of Common Stock for the portion of the
Note converted in accordance with the foregoing in the form described in Section
7.1(a) of the Subscription Agreement. At the election of the Holder, the
Borrower will deliver accrued but unpaid interest on the Note in the manner
provided in Section 1.3 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 of the Note and interest
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 equal to the lesser of (i) 70% of the
average of the closing bid prices of the Common Stock as reported by Bloomberg,
L.P. for the Principal Market (as defined in Section 9.1(b) of the Subscription
Agreement) for the three trading days immediately preceding the Closing Date (as
defined in Section 1 below), or (ii) the average of the three lowest closing bid
prices for the ten trading days preceding a Conversion Date.
(c) The Conversion Price and number and kind of shares or other
securities to be issued upon conversion determined pursuant to Section 2.1(a),
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 that may be issued or
outstanding, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities 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 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. So long as this Note is outstanding, if the
Borrower shall issue or agree to issue any shares of Common Stock except for the
Excepted Issuances (as defined in the Subscription Agreement) for a
consideration less than the Conversion Price in effect at the time of such
issue, then, and thereafter successively upon each such issue, the then
applicable Conversion Price shall be reduced to such other lower issue price.
For purposes of this adjustment, the issuance of any security 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 the above-described security and again upon the
issuance of shares of Common Stock upon exercise of such conversion or purchase
rights if such issuance is at a price lower than the then applicable Conversion
Price. The reduction of the Conversion Price described in this paragraph is in
addition to other rights of the Holder described in this Note and the
Subscription Agreement.
(d) Whenever the Conversion Price is adjusted pursuant to Section
2.1(c) above, the Borrower shall promptly mail to the Holder a notice setting
forth the Conversion Price after such adjustment and setting forth a statement
of the facts requiring such adjustment.
(e) From and after July 14, 2005 and during the period the conversion
right exists, Borrower will reserve from its authorized and unissued Common
Stock not less than 175% of shares to provide for the issuance of Common Stock
issuable 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, a new Note containing the same
date and provisions of this Note shall, at the request of the Holder, 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.
2.3 Maximum Conversion. The Holder shall not be entitled to convert on
a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion Date. For
the purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate conversions of only
4.99% and aggregate conversion by the Holder may exceed 4.99%. The Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section 2.3 will limit any conversion hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder. The Holder may waive the conversion
limitation described in this Section 2.3, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower. The Holder may
allocate which of the equity of the Borrower deemed beneficially owned by the
Holder shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
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, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay
any installment of principal, interest or other sum due under this Note 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 the Subscription Agreement or this Note in any
material respect and such breach, if subject to cure, continues for a period of
ten (10) business 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, 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 as of the date made and the Closing Date.
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 $75,000, and shall remain unvacated, unbonded or unstayed for a period
of seventy-five (75) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower and if instituted against
Borrower are not dismissed within seventy-five (75) days of initiation.
3.7 Delisting. Delisting of the Common Stock from the Principal
Market; failure to comply with the requirements for continued listing on the
Principal Market for a period of five consecutive trading days; or notification
from the Bulletin Board or any Principal Market that the Borrower is not in
compliance with the conditions for such continued listing on the Bulletin Board
or other Principal Market.
3.8 Non-Payment. A default by the Borrower under any one or more
obligations in an aggregate monetary amount in excess of $75,000 for more than
twenty days after the due date, unless the Borrower is contesting the validity
of such obligation in good faith.
3.9 Stop Trade. An SEC or judicial stop trade order or Principal
Market trading suspension that lasts for five or more consecutive 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 Sections 7 and 11 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 11.4 of the Subscription Agreement.
3.12 Approval Default. The occurrence of an Approval Default as
described in Section 7.8 of the Subscription Agreement.
3.13 Reservation Default. Failure by the Borrower to have reserved for
issuance upon conversion of the Note the amount of Common Stock as set forth in
this Note and the Subscription Agreement.
3.14 Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement relating to the
issuance of debt or equity of the Borrower to which the Borrower and Holder are
parties, or the occurrence of a material event of default under any such other
agreement which is not cured after any required notice and/or cure period.
ARTICLE IV
MISCELLANEOUS
4.1 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.
4.2 Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: Mobile Reach
International, Inc., 0000 Xxxxxxxx Xxxx Xx., #000, Xxxx, Xxxxx Xxxxxxxx 00000,
Attn: Xxxx Xxxxxxxxxxx Xxxxxxx, CEO, telecopier number: (000) 000-0000, with a
copy by telecopier only to: Xxxxxxx X. Xxxxxxx, Esq., Xxxxxxxx Xxxxxxx LLP, The
Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, xxxxxxxxxx number:
(000) 000-0000, and (ii) if to the Holder, to the name, address and telecopy
number set forth on the front page of this Note, with a copy by telecopier only
to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, telecopier number: (000) 000-0000.
4.3 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.
4.4 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.
4.5 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.
4.6 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.
4.7 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.
4.8 Shareholder Status. The Holder shall not have rights as a
shareholder of the Borrower with respect to unconverted portions of this Note.
However, the Holder will have all the rights of a shareholder of the Borrower
with respect to the shares of Common Stock to be received by Holder after
delivery by the Holder of a Conversion Notice to the Borrower.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be signed in its name
by an authorized officer as of the ____ day of April, 2005.
MOBILE REACH INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
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 MOBILE REACH
INTERNATIONAL, INC. on April 27, 2005 into Shares of Common Stock of MOBILE
REACH INTERNATIONAL, INC. (the "Borrower") 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:_______________________________________________________________________
_______________________________________________________________________
