CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT (this "AGREEMENT") dated as
of October 20, 2003, is entered into between SurfNet Media Group, Inc., a
Delaware corporation (the "COMPANY" or "SurfNet"), and BCC Investment Foundation
Holdings Ltd., a British Virgin Islands corporation ("BCC")
WHEREAS, BCC desires to invest in SurfNet by purchasing convertible promissory
notes with an aggregate principal amount of up to $500,000 upon the terms and
subject to the conditions set forth in this Agreement, and SurfNet desires such
an investment;
Accordingly, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"BUSINESS DAY" means a day other than Saturday or Sunday, on which commercial
banks are open for business in Phoenix, Arizona.
"DOLLARS" and the sign "$" each means lawful money of the United States.
"GOVERNMENTAL AUTHORITY" means any United States federal, state, local or other
governmental department, commission, board, bureau, agency, central bank, court,
tribunal or other instrumentality or authority, domestic or foreign, exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"LIEN" means any mortgage, deed of trust, pledge, security interest, assignment,
deposit arrangement, charge or encumbrance, lien (statutory or other), or other
preferential arrangement (including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing or any agreement to give any security interest).
"MATERIAL ADVERSE EFFECT" means any event, matter, condition or circumstance
which: (i) has or would reasonably be expected to have a material adverse change
on SurfNet's business, prospects, operating results or financial condition; (ii)
would materially impair the ability of SurfNet to perform or observe its
obligations under or in respect of the Transaction Documents; or (iii)
materially affects the legality, validity, binding effect or enforceability of
any of the Agreement or the Notes.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes and all other
certificates, documents, agreements and instruments delivered to BCC under or in
connection with this Agreement.
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ARTICLE 2
PURCHASE AND SALE OF NOTES
2.1 SALE AND ISSUANCE OF THE FIRST NOTE AND SECOND NOTE. Subject to the terms
and conditions of this Agreement, (i) BCC agrees to purchase, and the
Company agrees to sell and issue to BCC, one Note in the principal amount
of One Hundred Thousand Dollars ($100,000) (the "FIRST NOTE") upon receipt
of such amount; and (ii) BCC agrees to purchase, and the Company agrees to
sell and issue to BCC, a second Note in the principal amount of One Hundred
Thousand Dollars ($100,000) (the "SECOND NOTE") upon receipt of such
amount.
2.2 FIRST AND SECOND CLOSINGS. The purchase and sale of the First Note shall
take place at the Company's offices, not later than 3:00 p.m. Arizona Time
on or before Thursday, October 23, 2003 (the "FIRST CLOSING"). At the First
Closing, the Company shall deliver to BCC the First Note against payment of
the purchase price therefor by wire transfer. The purchase and sale of the
Second Note shall take place at the Company's offices, at not later than
10:00 a.m. Arizona Time on or before November 4, 2003 (the "SECOND
CLOSING"). At the Second Closing, the Company shall deliver to BCC the
Second Note against payment of the purchase price therefor by wire
transfer.
2.3 SALE AND ISSUANCE OF THE THIRD NOTE. SurfNet shall issue and sell to BCC,
and BCC agrees to purchase from SurfNet, on the terms and conditions herein
set forth, a third Note with a principal amount of One Hundred Fifty
Thousand Dollars ($150,000) (the "THIRD NOTE") upon receipt of such amount;
PROVIDED, SurfNet has achieved gross monthly sales of Three Hundred
Thousand Dollars ($300,000) for two consecutive months (the "MILESTONE").
2.4 PROCEDURE FOR PURCHASE OF THIRD NOTE. The purchase of the Third Note shall
be made upon written notice from BCC to SurfNet. Such notice (the "NOTICE
OF BORROWING") shall refer to this Agreement and shall specify: (i) the
proposed date of the sale of the Third Note, which shall be a Business Day;
and (ii) a request for payment instructions with respect to the funds to be
made available to SurfNet as a result of such borrowing. Upon fulfillment
of the applicable conditions set forth in this Agreement, BCC shall
purchase the Note from SurfNet on the date set forth on the Notice of
Borrowing. The closing for the Third Note shall be the date of funding of
the Third Note.
2.5 SALE AND ISSUANCE OF THE FOURTH NOTE. SurfNet shall issue and sell to BCC,
and BCC agrees to purchase from SurfNet, on the terms and conditions herein
set forth, a fourth Note with a principal amount of One Hundred Fifty
Thousand Dollars ($150,000) (the "FOURTH NOTE") upon receipt of such
amount; PROVIDED, SurfNet has achieved gross monthly sales of Four Hundred
Fifty Thousand Dollars ($450,000) for two consecutive months (the
"MILESTONE").
2.6 PROCEDURE FOR PURCHASE OF FOURTH NOTE. The purchase of the Fourth Note
shall be made upon written notice from BCC to SurfNet. Such notice (the
"NOTICE OF BORROWING") shall refer to this Agreement and shall specify: (i)
the proposed date of the sale of the Fourth Note, which shall be a Business
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Day; and (ii) a request for payment instructions with respect to the funds
to be made available to SurfNet as a result of such borrowing. Upon
fulfillment of the applicable conditions set forth in this Agreement, BCC
shall purchase the Note from SurfNet on the date set forth on the Notice of
Borrowing. The closing for the Fourth Note shall be the date of funding of
the Fourth Note.
ARTICLE 3
TERMS OF THE NOTES
3.1 INTEREST. Interest shall accrue on the unpaid principal amount of each Note
from the date of such Note until the maturity thereof, at an interest rate
of Ten Percent (10%) per annum. Interest shall be computed as simple annual
interest on the basis of a year of 360 days for the actual number of days
occurring in the period for which such interest is payable. . For a period
of five years from the date of issuance of eachNote, interest shall be
payable quarterly in arrears on the thirtieth day following the closing of
the calendar quarter through the issuance of that number of fully paid and
non-assessable shares of SurfNet $.0001 par value common stock (the "COMMON
STOCK") obtained by dividing the accrued interest due under such Note by
One Dollar ($1.00) per share. Thereafter, SurfNet shall have the option to
pay accrued interest on the Notes in Dollars.
3.2 REPAYMENT OF THE NOTES. The principal amount and accrued interest
outstanding under each Note hereunder shall be due and payable on or before
the seventh anniversary of the date of issuance of such Note (the "MATURITY
DATE"), unless earlier prepaid under Section 3.3, converted or accelerated.
3.3 PREPAYMENTS. At any date following the fifth anniversary of the issuance
thereof, SurfNet may, upon prior notice to BCC not later than ten (10)
Business Days prior to the date of prepayment, prepay the outstanding
principal amount and interest under any Note in whole or in part; provided
that SurfNet gives BCC thirty (30) days written notice within which to
exercise its right of conversion under Section 3.4. In the event of
prepayment, SurfNet shall pay BCC a prepayment penalty calculated as
follows: Fifteen percent (15%) of the principal amount of any Note prior to
the second anniversary of the issuance thereof; ten percent (10%) of the
principal amount of any Note prior to the third anniversary of the issuance
thereof; and five percent (5%) of the principal amount of any Note prior to
the fourth anniversary of the issuance thereof. Following the fifth
anniversary of the issuance thereof, SurfNet may prepay the outstanding
principal amount and interest under any Note without premium or penalty.
The notice given of any prepayment shall specify the date and amount of the
prepayment and the date of the Note to which such prepayment shall be
applied.
3.4 CONVERSION OF NOTES.
(a) RIGHT TO CONVERT. Subject to and upon compliance with the provisions
of this Agreement, BCC shall have the right at its option to convert
the outstanding principal amount under the First Note, the Second Note
or the Third Note or any portion thereof PROVIDED such portion of
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principal amount is at least $10,000, into that number of fully paid
and non-assessable shares of SurfNet Common Stock obtained by dividing
the principal amount under such Note surrendered for conversion by the
Conversion Price (as defined below) in effect at such time.
(b) AUTOMATIC CONVERSION OF THE NOTES. Unless earlier converted pursuant
to Section 3.4(a) above, the outstanding principal amount under the
Notes shall automatically be converted into that number of fully paid
and non-assessable shares of SurfNet Common Stock obtained by dividing
the principal amount under the Note surrendered for conversion by the
Conversion Price (as defined below) when SurfNet achieves a run rate
equaling gross annual sales of Thirteen Million Eight Hundred Thousand
Dollars ($13,800,000) calculated on a rolling twelve (12) month basis.
(c) EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF PREFERRED STOCK ON
CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order to
exercise the right to conversion with respect to a Note, BCC shall
surrender the Note and shall give written notice of conversion to
SurfNet that BCC elects to convert the Note or the specified portion
thereof specified in said notice. Such notice shall also state the
name or names (with address) in which the certificate or certificates
for shares of SurfNet Common Stock which shall be issuable on such
conversion shall be issued. As promptly as practicable, but in no
event more than fifteen (15) Business Days after satisfaction of the
requirements for conversion set forth above, SurfNet shall issue and
shall deliver to BCC, a certificate or certificates for the number of
full shares issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this subsection (c) and a
check or cash in respect of any fractional interest in respect of a
share of SurfNet Common Stock arising upon such conversion, as
provided below. In case any Note shall be surrendered for partial
conversion, SurfNet shall execute and deliver to the holder of the
Note so surrendered, without charge, a new Note or Notes in authorized
denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note. Each conversion shall be
deemed to have been effected as to any such Note (or the specified
portion thereof) on the date on which the requirements set forth above
in this Agreement required to be satisfied by the holder have been
satisfied as to such Note (or portion thereof), and the person whose
name any certificate or certificates for shares of SurfNet Common
Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented
thereby. No fractional shares or scrip representing fractional shares
shall be issued upon conversion of Notes. If any fractional share of
stock would be issuable upon the conversion of any Note or Notes,
SurfNet shall make an adjustment therefor in cash at the current fair
market value thereof.
3.5 CONVERSION PRICE. The "CONVERSION PRICE" shall be Sixty-five cents ($0.65)
per share.
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3.6 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any of the
following events occur, namely (i) any reclassification or change of
outstanding shares of SurfNet Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), (ii) any
consolidation, merger or combination of SurfNet with another corporation as
a result of which holders of SurfNet Common Stock shall be entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock (a "Merger"), or (iii) any
sale or conveyance of the properties and assets of SurfNet as, or
substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in exchange
for such Common Stock (an "Asset Sale"), then SurfNet or the successor or
purchasing corporation, as the case may be, shall execute with BCC an
amendment to this Agreement providing that all issued and outstanding Notes
shall be convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or
conveyance by a holder of a number of shares of Common Stock issuable upon
conversion of such Notes immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance.
3.7 RESERVATION OF SHARES; SHARES TO BE FULLY PAID. SurfNet shall provide, free
from preemptive rights, out of its authorized but unissued shares or shares
held in treasury, sufficient shares to provide for the conversion of the
Notes from time to time as such Notes are presented for conversion. From
the execution of this Agreement, SurfNet will take all corporate action
which may, in the opinion of its counsel, be necessary in order that
SurfNet may validly and legally issue shares of such SurfNet Common Stock
at such adjusted Conversion Price. SurfNet covenants that all shares of
SurfNet Common Stock which may be issued upon conversion of Notes will upon
issue be fully paid and non-assessable by SurfNet and free from all taxes,
Liens and other charges with respect to the issue thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SurfNet. SurfNet hereby represents and
warrants to BCC that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now
conducted. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect on SurfNet.
(b) AUTHORIZATION AND ISSUANCE. The execution, delivery and performance of
the Transaction Documents and any other agreement contemplated
hereunder by SurfNet have been duly authorized by all necessary
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corporate action of SurfNet. The shares of Common Stock to be issued
upon conversion of the Notes (the "CONVERSION SHARES") have been or
will be duly authorized by all necessary corporate action of SurfNet
and, upon issuance and payment therefor, will be validly issued, fully
paid and non-assessable, and issued, upon BCC making appropriate
written investment representations to SurfNet upon the conversion of
each Note into shares of Common Stock as provided in this Agreement,
in compliance with the qualification and registration requirements or
exemptions therefrom under all applicable state and federal securities
laws.
(c) APPROVALS AND CONSENTS. No approval, consent or authorization of any
natural person, firm, corporation or Governmental Authority which has
not heretofore been obtained is necessary for the execution or
delivery of this Agreement, the Transaction Documents or any other
agreement contemplated hereunder by SurfNet or for the performance by
SurfNet of any of the terms or conditions thereof.
(d) OFFERING. Subject in part to the truth and accuracy of BCC's
representations set forth in Section 4.2 of this Agreement, the offer,
sale and issuance of the Notes as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and
neither the Company nor any authorized agent acting on its behalf will
take any action hereafter that would cause the loss of such exemption.
(e) LITIGATION. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company that questions the
validity of this Agreement or the Transaction Documents, or the right
of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby. The Company is not a
party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality.
(f) PATENTS AND TRADEMARKS. To its knowledge (but without having conducted
any special investigation or patent search), the Company has
sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes necessary for its business as now
conducted without any conflict with or infringement of the rights of
others. The Company has not received any communications alleging that
the Company has violated or, by conducting its business, would violate
any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that
would interfere with the use of his or her best efforts to promote the
interests of the Company or that would conflict with the Company's
business as conducted. Neither the execution nor delivery of this
Agreement nor the carrying on of the Company's business by the
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employees of the Company, nor the conduct of the Company's business
will, to the Company's knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such
employees is now obligated.
(g) COMPLIANCE WITH LAW. SurfNet, to its knowledge, is in material
compliance with all applicable statutes, laws, regulations and
executive orders of the United States of America and all states,
foreign countries, and other governmental bodies and agencies having
jurisdiction over its business or properties except to the extent
non-compliance would not have a Material Adverse Effect on SurfNet,
and SurfNet has received no notice of any violation of such statutes,
laws, regulations or orders which has not been remedied prior to the
date hereof.
(h) AGREEMENTS; CONTRACTS. SurfNet has not materially breached, nor does
it have knowledge of any claim or threat that it has materially
breached, any terms or conditions of any material agreement, contract,
lease, license, instrument or commitment that, individually or in the
aggregate, could have a Material Adverse Effect on SurfNet, nor is
SurfNet in violation of any term of its Certificate of Incorporation
or Bylaws, as now in effect. The execution, delivery and performance
of and compliance with this Agreement and the other Agreements
contemplated hereby, and the issuance of the Notes or the Conversion
Shares, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under any of the foregoing, or
result in the creation of any Lien or charge upon any of the
properties or assets of SurfNet.
(i) DISCLOSURE. The Company has provided BCC with all the information that
it has requested for deciding whether to purchase the Notes. To its
knowledge, neither this Agreement nor any other written statements or
certificates made or delivered in connection herewith or therewith
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not
misleading.
(j) TITLE TO PROPERTY AND ASSETS. The Company owns its property and assets
free and clear of all Liens, except such Liens that are immaterial in
size (individually or in the aggregate), arise in the ordinary course
of business and do not materially impair the Company's ownership or
use of such property or assets. With respect to the property and
assets it leases, the Company is in compliance with such leases and,
to its knowledge, holds a valid leasehold interest free of any Liens.
4.2 REPRESENTATIONS AND WARRANTIES OF BCC. BCC hereby represents and warrants
to SurfNet that:
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(a) AUTHORIZATION. BCC has full power and authority to enter into this
Agreement and the Transaction Documents, and each such agreement
constitutes its valid and legally binding obligation, enforceable in
accordance with its terms.
(b) ORGANIZATION, GOOD STANDING AND QUALIFICATION. BCC is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite power and
authority to carry on its business as now conducted. BCC is duly
qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would not have a
Material Adverse Effect on BCC.
(c) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with BCC in
reliance upon its representation to SurfNet, which by its execution
hereof BCC hereby confirms, that the Notes to be received by it, the
Common Stock issuable upon conversion of the Notes (collectively, the
"SECURITIES") will be acquired for investment for its own account, not
as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that BCC has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, BCC further
represents that it does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to
any of the Securities.
(d) DISCLOSURE OF INFORMATION. BCC believes it has received all the
information it considers necessary or appropriate for deciding whether
to purchase the Notes. BCC further represents that it has had an
opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Notes, and
the business, properties, prospects and financial condition of the
Company.
(e) INVESTMENT EXPERIENCE. BCC is an investor in securities of companies
in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the
Notes. If other than an individual, Investor also represents it has
not been organized for the purpose of acquiring the Notes.
(f) ACCREDITED INVESTOR. BCC is an "accredited investor" within the
meaning of SEC Rule 501 of Regulation D, as presently in effect.
(g) RESTRICTED SECURITIES. BCC understands that the Securities it is
purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be
resold without registration under the Securities Act, only in certain
limited circumstances. In this connection, BCC represents that it is
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familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
(h) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, BCC further agrees not to make any
disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to
be bound by this Section 4.2, and:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with such Registration
Statement; or
(ii) BCC shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition
will not require registration of such shares under the Securities
Act and satisfies the requirements of Rule 144.
(i) LEGENDS. It is understood that the certificates evidencing the
Securities may bear the following legend:
"These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Securities Act or an opinion of
counsel satisfactory to the Company that such registration is not
required."
ARTICLE 5
CONDITIONS
5.1 CONDITIONS OF BCC AT THE CLOSING. The obligation of BCC to purchase the
Notes at the Closing shall be subject to the satisfaction of each of the
following conditions:
(a) The representations and warranties of SurfNet contained in Section 4.1
shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the
date of such Closing.
(b) The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the
Closing.
(c) There is no Event of Default (as defined in Section 7.1).
5.2 CONDITIONS OF SurfNet. The obligations of the Company to BCC under this
Agreement are subject to each of the following conditions:
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(a) The representations and warranties of BCC contained in Section 4.2
shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of such
dates.
(b) BCC shall have funded the principal amount of the Notes.
ARTICLE 6
COVENANTS
6.1 AFFIRMATIVE COVENANTS. So long as any of the Notes shall remain unpaid or
BCC shall have any obligation to purchase Notes hereunder, SurfNet agrees
that:
(a) PRESERVATION OF EXISTENCE. SurfNet will maintain and preserve, through
itself or any successor to its business, its corporate existence, its
rights to transact business and all other rights, franchises and
privileges necessary or desirable in the normal course of its business
and operations and the ownership of its material properties.
(b) COMPLIANCE WITH LAWS. SurfNet will comply in all material respects
with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority and the terms of any material
indenture, contract or other instrument to which it may be a party or
under which it or its properties may be bound, except to the extent
failure to so comply would not have a Material Adverse Effect.
(c) MAINTENANCE OF PROPERTIES. SurfNet will use commercially reasonable
efforts to maintain and preserve all of its material properties
necessary or useful in the proper conduct of its business in good
working order and condition in accordance with the general practice of
other corporations of similar character and size, ordinary wear and
tear excepted.
(d) LICENSES. SurfNet will use commercially reasonable efforts to obtain
and maintain all licenses, authorizations, consents, filings,
exemptions, registrations and other governmental approvals necessary
in connection with the execution, delivery and performance of the
Transaction Documents, the consummation of the transactions therein
contemplated or the operation and conduct of its business and
ownership of its properties.
(e) FURTHER ASSURANCES AND ADDITIONAL ACTS. SurfNet will execute,
acknowledge, deliver, file, notarize and register at its own expense
all such further agreements, instruments, certificates, documents and
assurances and perform such acts as BCC shall deem reasonably
necessary or appropriate to effectuate the purposes of the Transaction
Documents, and promptly provide BCC with evidence of the foregoing
reasonably satisfactory in form and substance to BCC.
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(f) PLACE OF BUSINESS. The Company shall provide BCC prompt written notice
of any change in the location of its principal place of business and
its chief executive office.
(g) INSPECTION RIGHTS. The Company shall permit BCC, at BCC's expense, to
visit and inspect the Company's properties, to examine its books of
account and records and to copy the same and to make excerpts
therefrom, and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times during normal business
hours as may be reasonably requested by BCC, so long as such
inspection, examination, copying and discussions do not unreasonably
interfere with the business of the Company and BCC agrees to keep any
and all information obtained during inspection, examination, copying
and discussions confidential, not disclose such information (except as
may be required by law or court order, such information and not
otherwise known to BCC through other sources or publicly known).
ARTICLE 7
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Any of the following events that shall occur shall
constitute an "EVENT OF DEFAULT":
(a) PAYMENTS. SurfNet shall fail to pay when due any amount of principal
of, or interest on, any Note, or any other amount payable under any
Transaction Document, and such failure shall remain unremedied by
SurfNet for a period of thirty (30) days following the date of notice
that such payment is due.
(b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty by
SurfNet in the Transaction Documents shall prove to have been
incorrect in a material respect when made or deemed made.
(c) FAILURE BY SurfNet TO PERFORM CERTAIN COVENANTS. SurfNet shall fail to
perform or observe any material term, covenant or agreement contained
in this Agreement and any such failure shall remain unremedied for a
period of thirty (30) days from the notice by BCC of the occurrence
thereof.
(d) BANKRUPTCY. SurfNet shall file a voluntary petition in bankruptcy or a
petition or answer seeking reorganization, to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy
Reform Act of 1978 (the "BANKRUPTCY CODE") or under any other state or
federal law relating to bankruptcy or reorganization granting relief
to debtors, whether now or hereafter in effect, or shall file an
answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition filed against SurfNet pursuant
to the Bankruptcy Code or any such other state or federal law; or
SurfNet shall be adjudicated a bankrupt, or shall make an assignment
for the benefit of creditors, or shall apply for or consent to the
appointment of any custodian, receiver or trustee for all or any
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substantial part of SurfNet's property, or shall take any action to
authorize any of the actions or events set forth above in this
subsection; or an involuntary petition seeking any of the relief
specified in this subsection shall be filed against SurfNet; or any
order for relief shall be entered against SurfNet in any involuntary
proceeding under the Bankruptcy Code or any such other state or
federal law referred to in this subsection (d).
7.2 CURE. Upon each of such Event of Default, the Company shall have thirty
(30) days to cure such default after receipt of written notice of default
from BCC specifying the nature of the Company's default. If the Company is
unable to cure its default within such thirty (30) day period, BCC may, at
its option, accelerate repayment of the Outstanding Balance in which case
the Outstanding Balance shall be due and payable immediately. Upon any
default of the Company hereunder, BCC may pursue any remedies that are
available to it. In addition, BCC shall have a right to offset any amounts
due upon such a default against any amounts (including royalties, if any)
payable by BCC or its parent to the Company.
ARTICLE 8
MISCELLANEOUS
8.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of SurfNet and BCC. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon both
parties hereto.
8.2 NOTICES. Except as may be otherwise provided herein, all notices, requests,
waivers and other communications made pursuant to this Agreement shall be
in writing and shall be conclusively deemed to have been duly given (a)
when hand delivered to the other party; (b) when received when sent by
facsimile at the address and number set forth below (provided, however,
that notices given by facsimile shall not be effective unless either (i) a
duplicate copy of such facsimile notice is promptly given by one of the
other methods described in this Section 8.2, or (ii) the receiving party
delivers a written confirmation of receipt for such notice either by
facsimile or any other method described in this Section 8.2; (c) three
business days after deposit in the U.S. mail with first class or certified
mail receipt requested postage prepaid and addressed to the other party as
set forth below; or (d) the next business day after deposit with a national
overnight delivery service, postage prepaid, addressed to the parties as
set forth below with next-business-day delivery guaranteed, provided that
the sending party receives a confirmation of delivery from the delivery
service provider.
To BCC: To SurfNet:
X.X. Xxx 0000 2245 West University Drive, Suite 9
Road Town, Torotola, British Virgin Islands Xxxxx, XX 00000
Attention: Director Attention: Chief Financial Officer
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8.3 SURVIVAL. All covenants, agreements, representations and warranties made
herein shall, except to the extent otherwise provided herein, survive the
execution and delivery of this Agreement, the execution and delivery of the
Notes, and shall continue in full force and effect so long as BCC has any
commitment, any Notes remain outstanding or unpaid or any obligation to
perform any other act under this Agreement or the Transaction Documents
otherwise remains unsatisfied.
8.4 BENEFITS OF AGREEMENT. The Transaction Documents are entered into for the
sole protection and benefit of the parties hereto and their successors and
assigns, and no other person shall be a direct or indirect beneficiary of,
or shall have any direct or indirect cause of action or claim in connection
with, any Transaction Document.
8.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall become effective when it
shall have been executed by SurfNet and BCC and thereafter shall be binding
upon, inure to the benefit of and be enforceable by SurfNet, BCC and their
successors and assigns
8.6 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with the law of the State of Delaware without regard to
application of principles of conflicts of laws.
8.7 ENTIRE AGREEMENT. This Agreement and the documents referred to herein
constitute the entire agreement between the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
8.8 SEVERABILITY. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with
its terms.
8.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.
8.10 DISPUTE RESOLUTION. The parties agree to negotiate in good faith to resolve
any dispute between them regarding this Agreement. If the negotiations do
not resolve the dispute to the reasonable satisfaction of both parties,
then each party shall nominate one officer as its representative. These
representatives shall, within thirty (30) days of a written request by
either party to call such a meeting, meet in person and alone (except for
one assistant for each party) and shall attempt in good faith to resolve
the dispute. If the disputes cannot be resolved in such meeting, the
parties agree that they shall, if requested in writing by either party,
meet within thirty (30) days after such written notification for one day
with an impartial mediator and consider dispute resolution alternatives
other than litigation. If an alternative method of dispute resolution is
not agreed upon within thirty (30) days after the one day mediation, either
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party may begin litigation proceedings. This procedure shall be a
prerequisite before taking any additional action hereunder.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of
the date first above written.
BCC INVESTMENT FOUNDATION HOLDINGS LTD. SURFNET MEDIA GROUP, INC.
By: /s/ Xxxxxxxx Xxxxxx By:/s/ Xxxxxx X. Xxxxx
Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxx
Director Chairman
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EXHIBIT A
FORM OF CONVERTIBLE PROMISSORY NOTE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED FOR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IS AN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
CONVERTIBLE PROMISSORY NOTE
____________, 2003
Tempe, Arizona
FOR VALUE RECEIVED, SurfNet Media Group, Inc., a Delaware corporation
("MAKER" or "SurfNet"), promises to pay to the order of BCC Investment
Foundation Holdings Ltd., a British Virgin Islands corporation ("HOLDER" or
"BCC"), the principal sum of _______________________, together with interest
from the date of this Note on the unpaid principal balance at a rate of Ten
Percent (10%). Interest shall be computed as simple annual interest on the basis
of a year of 360 days for the actual number of days occurring in the period for
which such commitment fee or interest is payable. Payment shall be made by Maker
to Holder at the offices of BCC, located at X.X. Xxx 0000, Xxxx Xxxx, Xxxxxxxx,
British Virgin Islands, or to such other office and account of Holder as it from
time to time shall designate in a written notice to Maker.
This Note is issued pursuant to that certain Convertible Note Purchase Agreement
dated as of October 20, 2003, between Maker and Holder (the "AGREEMENT"). Terms
used herein have the meanings assigned to those terms in the Agreement, unless
otherwise defined herein.
The terms of payment of principal and accrued interest shall be in accordance
with the terms and conditions of the Agreement. Payment shall be made in lawful
tender of the United States and shall be credited first to accrued interest then
due and payable with the remainder applied to principal. Prepayment of the
principal, together with accrued interest, may be made at any time without
penalty or premium, subject to Section 3.3 of the Agreement.
The unpaid principal on this Note (or any portion thereof) shall be convertible
at the election of Holder into shares of SurfNet Common Stock pursuant to the
terms and conditions set forth in the Agreement.
If action is instituted to collect this Note, Maker will pay all costs and
expenses, including reasonable attorneys' fees, incurred in connection with such
action. Maker hereby waives notice of default, presentment or demand for
payment, protest or notice of nonpayment or dishonor and all other notices or
demands relative to this instrument.
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The holding of any provision of this Note to be invalid or unenforceable by a
court of competent jurisdiction shall not affect any other provisions and the
other provisions of this Note shall remain in full force and effect.
This Note shall be construed in accordance with the laws of the state of
Delaware, without regard to the conflicts of law provisions of the state of
Delaware or of any other state.
The Maker has caused this Convertible Promissory Note to be issued as of the
date first above written.
SURFNET MEDIA GROUP, INC.
By:______________________________
Its:______________________________
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