Contract
Exhibit
4.1
NEITHER
THIS NOTE NOR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE, NOR ANY INTEREST IN
THIS NOTE (INCLUDING THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE)
MAY
BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (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 STATE SECURITIES LAWS WHERE THE
HOLDER HAS FURNISHED TO THE COMPANY AN OPINION OF ITS COUNSEL THAT AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND STATE SECURITIES LAWS IS
AVAILABLE.
WINSONIC
DIGITAL MEDIA GROUP, LTD.
6%
CONVERTIBLE SUBORDINATED PROMI SSORY NOTE
|
$300,000
|
December
3, 2007
|
FOR
VALUE
RECEIVED, the undersigned, Winsonic Digital Media Group, Ltd., a Nevada
corporation ("Payor"), having its executive office at 000 Xxxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000 promises to pay
to SURRY X. XXXXXXX ("Payee"), having an address at
000 Xxxxxxxx Xxxx, Xxxxxxx, XX 00000 (or at such other place as Payee may from
time to time hereafter direct by notice in writing to Payor), the principal
sum
of THREE HUNDERED THOUSAND DOLLARS ($300,000) plus accrued interest, in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts, on the first to occur of
the
following dates:
(i) June
30, 2008, (the "Maturity Date") upon the demand by the holder of
this Note;
(ii) the
date on which the outstanding principal amount of this Note plus accrued
interest as of said date is prepaid in full by the Payor as hereinafter
permitted (the "Prepayment Date");
(iii) the
date of which the outstanding principal amount of this Note plus accrued
interest is automatically converted at the rate of $0.40 per share, or the
Payee
elects to convert this Note into Common Stock of the Payor at the rate of $0.40
per share (the “Conversion Date”), which election may be made at any time by
Payee by delivering a conversion notice form in writing to Payor;
and
(iv)
any
other date on which any principal amount of, or accrued unpaid interest on,
this
Note is declared to be, or becomes, due and payable pursuant to its terms prior
to the Maturity Date (the "Acceleration Date").
Interest
And Payment.
1.1. The
principal amount of this Note outstanding from time to time shall bear simple
interest at the annual rate (the "Note Rate") of 6% from the date hereof
through
the
earliest to occur of (i) the Maturity Date; (ii) the Prepayment Date;
(iii) the Conversion Date, or (iv) the Acceleration Date.
1.2. Interest
accrued on this Note shall only be payable on the earliest to occur of (i)
the
Maturity Date; (ii) the Prepayment Date; (iii) the Acceleration Date; or (iv)
the Conversion Date.
1.3. All
payments made by the Payor on this Note 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.
1.4. 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
New York, 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.
2. Replacement
Of Note.
2.1. 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, and in the case of mutilation, 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.
2.2. Every
Note issued pursuant to the provisions of Section 2.1 above in substitution
for
this Note shall constitute an additional contractual obligation of the Payor,
whether or not this Note shall be found at any time or be enforceable by
anyone.
3. Prepayment. 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 accrued through the Prepayment Date. Each partial prepayment
of this Note shall first be applied to interest accrued through the Prepayment
Date and then to principal.
4. Merger
Acceleration Date. On or before the Maturity Date, if
the Payor completes a transaction (“Merger Transaction”) in which (a) Payor is
merged or consolidated with or into any other corporation in which the
shareholders of the Payor shall own less than 50% of the voting securities
of
the surviving corporation or (b) the acquirer purchases all or substantially
all
of the Payor’s assets, the principal and accrued interest outstanding under the
Notes will be due and payable upon the closing (the “Merger Acceleration Date”)
of such Merger Transaction subject to the Payee’s rights of conversion set forth
in Section 8 below.
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5. Covenants
of Payor.
Payor
covenants and agrees that, so long as this Note remains outstanding and unpaid,
in whole or in part:
5.1. Payor
will not sell, transfer or dispose of a material part of its
assets;
5.2. 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 with respect
to any such tax, assessment, charge, levy or claim so contested;
5.3. 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;
5.4. 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;
5.5. 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; and
5.6. 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.
6. Events
of Default. If any of the following
events (each an "Event of Default") occurs:
6.1. The
dissolution of Payor or any vote in favor thereof by the board of directors
and
shareholders of Payor; or
6.2. Xxxxx
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
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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 sixty (60) days from the date of its filing; or
6.3. Payor
fails to pay the principal amount, or interest on, or any other amount payable
under this Note as and when the same becomes due and payable, or, Payor fails
to
timely issue to Payee any Common Stock upon valid conversion of this Note as
required by this Note; and, except as to a payment default which must be cured
within five (5) days of the date of such default, such default is not cured
within thirty (30) days of such default; or
6.4. Xxxxx
admits in writing its inability to pay its debts as they mature; or
6.5. Payor
sells all or substantially all of its assets or merges or is consolidated with
or into another corporation, or
6.6. 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 $5,000,000 and secured by such property or assets) of Payor
or of any subsidiary of Payor; or
6.7. Payor
defaults in the due observance or performance of any covenant, condition or
agreement and/or commits a material breach of the representations or warranties
in this Note, the part of Payor to be observed or performed pursuant to the
terms of this Note (other than the default specified in Section 6.3 above)
and
such default continues uncured for a period of sixty (60) days then, upon the
occurrence of any such Event of Default and at any time thereafter, the holder
of this Note shall have the right (at such holder's option) to declare the
principal of, accrued unpaid interest on, and all other amounts payable under
this Note to be forthwith due and payable, whereupon all such amounts shall
be
immediately due and payable to the holder of this Note, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived; provided, however, that in case of the occurrence of an Event of Default
under any of the sections above, such amounts shall become immediately due
and
payable without any such declaration by the holder of this Note.
7. Suits
for Enforcement and Remedies; Change in
Control.
7.1. If
any one or more Events of Default shall occur and be continuing, the Payee
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 the holder of this Note. No right or remedy herein or in any
other agreement or instrument conferred upon the holder of this Note 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.
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8. Conversion
and Exchange.
8.1. The
Payee shall have the option to convert this Note into shares of Payor’s Common
Stock (the “Conversion Shares”) at any time on or prior to the Maturity Date at
the rate of $0.40 per share (the “Conversion Rate”).
8.2. On
or before the Maturity Date, if the Payor completes an equity financing of
Preferred Stock, Common Stock or a combination of the foregoing for at least
$2,000,000 (the “Next Financing), the principal and interest outstanding under
this Note will automatically convert into Conversion Shares at the Conversion
Rate. The Conversion Shares will have the same registration rights
equal to the most favorable as common stock in the Next Financing or any
subsequent financing.
8.3. On
or before the Maturity Date, if the Payor completes a Merger Transaction
described in Section 4 above, then the Payee shall have the option for thirty
(30) days prior to this Acceleration Date to convert all or part of the
principal and accrued interest outstanding under this Note into Conversion
Shares at the Conversion Rate.
8.4. Exercise
of the foregoing conversion rights shall be made by Payee delivering to Payor
a
notice (each, a “Conversion Notice”), stating the principal amount which Payee
has converted and the number of Conversion Shares to be issued in connection
with such conversion, which number of Conversion Shares shall be conclusive
absent manifest error. The issuance of the Conversion Shares shall be
deemed to have occurred as of the date of the giving of a Conversion Notice
with
respect to such Conversion Shares. Payee shall cooperate with Payor
and provide Payor with additional documentation or information upon reasonable
request in order to enable the Conversion Shares to be issued.
8.5. Upon
the giving of a Conversion Notice, Payee shall tender to Payor this Note for
cancellation against receipt by Payee of a stock certificate, registered in
the
name of Payee, evidencing ownership of the number of Conversion Shares subject
to such Conversion Notice. As soon as practicable following the
receipt of this Note upon the giving of such Conversion Notice, but no later
than three weeks following such receipt, Payor shall tender to Payee a stock
certificate, registered in the name of Payee, evidencing ownership of such
Conversion Shares by Payee. Notwithstanding any other rights provided
herein, if following the receipt by the Payor of a Conversion Notice, this
Note
and any other documentation or information reasonably requested by Payor to
enable Payor to issue the Conversion Shares to Payee, if such Conversion Shares
are not issued to Payee within three (3) then Payor shall issue to Payee an
additional One Million (1,000,000) fully paid and non-assessable shares of
Common Stock of Payor. Such issuance shall be without prejudice to
Xxxxx’s other rights under this Note and time shall be of the essence with
respect to the obligations set forth in this paragraph.
8.6. No
fractional Conversion Shares shall be issued upon conversion of this Note and
Payor shall exercise the Conversion Right in such a manner so that only whole
integrals of Conversion Shares shall be issuable upon exercise of a Conversion
Right.
8.7. Conversion
of this Note shall be deemed to have been made at the close of business on
the
date the Conversion Notice is delivered to Payor, so that interest shall not
accrue from and after such date on which the principal amount of this Note
converted and the
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person
or
persons entitled to receive Conversion Shares upon such conversion and/or
exchange shall be treated for all purposes as having been the record holder
or
holders thereof at such time and such conversion shall be at the Conversion
Rate
in effect at such time. The issuance of certificates for Conversion Shares
upon
conversion of this Note shall be made without charge to the holder of this
Note
for any tax in respect of the issuance of such certificates.
8.8. Payor
shall at all times keep available out of its authorized but unissued shares
of
Common Stock, solely for effecting the conversion of this Note, the full number
of whole Conversion Shares then deliverable upon conversion of the entire
principal amount of this Note, and accrued unpaid interest thereon, at the
time
outstanding. Payor shall take at all times such corporate action as shall be
necessary in order that Payor may validly and legally issue fully paid and
nonassessable shares of Common Stock in accordance with the provisions of this
Article 8.
8.9. If
the shares of Common Stock issuable upon the conversion of this Note shall
be
changed into the same or a different number of shares of any class or classes
of
stock, whether by capital reorganization, reclassification or otherwise, then
and in each such event the holder of this Note shall have the right thereafter
to convert this Note into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification
or
other change, by holders of the number of shares of Common Stock into which
this
Note might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
8.10.
In the event
of:
(1) any
taking by Payor of a record of any of the holders of any class of securities
for
any purpose, including, but not limited to, determining the holders who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or
any other securities or property, or to receive an other right; or
(2) any
meeting of holders of any class of securities of Payor or any action by holders
of any class of securities of Payor without a meeting; or
(3) any
capital reorganization of Payor, any reclassification of recapitalization of
the
capital stock of Payor or any transfer of all or substantially all of the assets
of Payor to or consolidation or merger of Payor with or into any other person;
or
(4) any
proposed issue or grant by Payor to the holders of Common Stock of any shares
of
stock of any class or any other securities (including but not limited to
convertible securities), or any right or option to subscribe for, purchase
or
otherwise acquire any shares of stock of any class or any other securities;
or
(5) any
proposed sale of Common Stock in the manner described in Section 8.9, then
and
in such event, Payor will mail or cause to be mailed to the holder of record
of
this Note a notice specifying (i) the date on which any such record is or was
to
be taken and the purpose therefore, (ii) the date and purpose of any
shareholders meeting or proposed shareholders action without meeting, (iii)
the
date on which any such sale, reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution,
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liquidation
or winding-up is to take place, and the time, if any is to be fixed, as of
which
the holders of record of Common Stock are to surrender or exchange such shares
of Common Stock for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up and (iv) the amount and character
of any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant
and
the persons or class of persons to whom such proposed issue or grant is to
be
offered or made. Such notice shall be mailed at least fifteen (15) days prior
to
the record date, shareholders meeting (or shareholders action without meeting)
or other event specified in this Section 8.9. Such notice shall no
longer be given upon expiration of the Conversion Period.
9. Registration
Rights.
9.1. Defined
Terms. As used in this Section 9, terms defined elsewhere herein
shall have their assigned meanings and each of the following terms shall have
the following meanings (such definitions to be applicable to both the plural
and
singular of the terms defined):
(1) Registerable
Securities. The term “Registerable Securities” shall mean the
Conversion Shares. For the purposes of this Section 9, securities
will cease to be Registerable Securities when (A) a registration statement
under
the Securities Act of 1933, as amended (the “Securities Act”), covering such
Registerable Securities has been declared effective and (1) such Registerable
Securities have been disposed of pursuant to such effective registration
statement or (2) such registration statement has remained effective for 270
consecutive days, (B) such Registerable Securities are distributed to the public
pursuant to the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act, including, without limitation, Rules 144
and
144A promulgated under the Securities Act or (C) such Registerable Securities
have been otherwise transferred and the Company, in accordance with applicable
law and regulations, has delivered new certificates or other evidences of
ownership for such securities which are not subject to any stop transfer order
or other restriction on transfer.
(2) Rightsholders. The
term “Rightsholders” shall include the Payee, all successors and assigns of the
Payee and all transferees of Registerable Securities where such transfer
affirmatively includes the transfer and assignment of the rights of the Payee
under this Note with respect to the transferred Registerable Securities and
such
transferee agrees in writing to assume all of the Payee’s agreements,
obligations and liabilities under this Note.
(3) Interpretations
of Terms. The words “hereof,” “herein” and “hereunder” and words
of similar import when used in this Section 9 shall refer to this Section 9
as a
whole and not to any particular provision of this Section 9, and subsection,
paragraph, clause, schedule and exhibit references are to this Section 9unless
otherwise specified.
9.2. Piggy-Back
Registration.
(1) If,
at any time on or after the date hereof and prior to the Maturity Date, the
Payor proposes to file a registration statement under the Securities Act with
respect to an offering by the Payor or any other party of any class of equity
security similar to
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any
Registerable Securities (other than a registration statement on Form S-4 or
Form
S-8 or any successor form or a registration statement filed solely in connection
with a stock option or other employee benefit plan, an exchange offer, a
business combination transaction or an offering of securities solely to the
existing stockholders or employees of the Payor), then the Payor, on each such
occasion, shall give written notice (each, a “Piggy-Back Notice”) of such
proposed filing to all of the Rightsholders owning Registerable Securities
at
least fifteen days before the anticipated filing date of such registration
statement, and such Piggy-Back Notice also shall be required to offer to such
Rightsholders the opportunity to register such aggregate number of Registerable
Securities as each such Rightsholder may request. Each such
Rightsholder shall have the right, exercisable for the five days immediately
following the giving of a Piggy-Back Notice, to request, by written notice
(each, a “Holder Notice”) to the Company, the inclusion of all or any portion of
the Registerable Securities of such Rightsholders in such registration
statement. The Payor shall use reasonable efforts to cause the
managing underwriter(s) of a proposed underwritten offering to permit the
inclusion of the Registerable Securities which were the subject of all Holder
Notices in such underwritten offering on the same terms and conditions as any
similar securities of the Payor included therein. Notwithstanding
anything to the contrary contained in this Section 9.2(1), if the managing
underwriter(s) of such underwritten offering or any proposed underwritten
offering delivers a written opinion to the Rightsholders of Registerable
Securities which were the subject of all Holder Notices that the total amount
and kind of securities which they, the Payor and any other person intend to
include in such offering is such as to materially and adversely affect the
success of such offering, then the amount of securities to be offered for the
accounts of such Rightsholders and persons other than the Payor shall be
eliminated or reduced pro rata (based on the amount of securities owned by
such
Rightsholders and other persons which carry registration rights) to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing underwriter(s) in the
managing underwriter’s written opinion.
(2) Number
of Piggy-Back Registrations; Expenses. The obligations of the
Payor under this Section 9 shall be unlimited with respect to each
Rightsholder. Subject to the provisions of Section 9.4 hereof, the
Payor will pay all Registration Expenses (as defined below) in connection with
any registration of Registerable Securities effected pursuant to this Section
9,
but the Company shall not be responsible for the payment of any underwriter’s
discount, commission or selling concession in connection therewith.
(3) Withdrawal
or Suspension of Registration Statement. Notwithstanding anything
contained to the contrary in this Section 9, the Payor shall have the absolute
right, whether before or after the giving of a Piggy-Back Notice or Holder
Notice, to determine not to file a registration statement to which the
Rightsholders shall have the right to include their Registerable Securities
therein pursuant to this Section 9, to withdraw such registration statement
or
to delay or suspend pursuing the effectiveness of such registration
statement. In the event of such a determination after the giving of a
Piggy-Back Notice, the Payor shall give notice of such determination to all
Rightsholders and, thereupon, (A) in the case of a determination not to register
or to withdraw such registration statement, the Payor shall be relieved of
its
obligation under this Section 9 to register any of the Registerable Securities
in connection with such registration and (B) in the case of a determination
to
delay the registration, the Payor shall be permitted to delay or suspend the
registration of Registerable Securities pursuant to this Section 9.2 for the
same period as the delay in the registration of such other
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securities. No
registration effected under this Section 9 shall relieve the Company of its
obligation to effect any registration upon demand otherwise granted to a
Rightsholder under any other agreement with the Company.
9.3. Registration
Procedures.
(1) Obligations
of the Payor. The Payor will, in connection with any registration
pursuant to Section 9.2 hereof, as expeditiously as possible:
(A) prepare
and file with the Securities and Exchange Commission (the “Commission”) a
registration statement under the Securities Act on any appropriate form chosen
by the Payor, in the Payor’s sole discretion, which shall be available for the
sale of all Registerable Securities in accordance with the intended method(s)
of
distribution thereof set forth in all applicable Holder Notices, and use the
Payor’s commercially reasonable best efforts to cause such registration
statement to become effective as soon thereafter as reasonably practicable
but
in no event more than 100 days after receipt of such notices or requests;
provided, that, at least five business days before filing with the
Commission of such registration statement, the Payor shall furnish to each
Rightsholder whose Registerable Securities are included therein draft copies
of
such registration statement, including all exhibits thereto and documents
incorporated by reference therein, and, upon the reasonable request of any
such
Rightsholder, shall continue to provide drafts of such registration statement
until filed, and, after such filing, the Payor shall, as diligently as
practicable, provide to each such Rightsholders such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus),
all exhibits thereto and documents incorporated by reference therein and such
other documents as such Rightsholder may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by such
Rightsholder and included in such registration statement; provided,
further, the Payor shall modify or amend the registration statement
as it
relates to such Rightsholder as reasonably requested by such Rightsholder on
a
timely basis, and shall reasonably consider other changes to the registration
statement (but not including any exhibit or document incorporated therein by
reference) reasonably requested by such Rightsholder on a timely basis, in
light
of the requirements of the Securities Act and any other applicable laws and
regulations; and provided, further, that the obligation of the
Payor to effect such registration and/or cause such registration statement
to
become effective, may be postponed for (1) such period of time when the
financial statements of the Payor required to be included in such registration
statement are not available (due solely to the fact that such financial
statements have not been prepared in the regular course of business of the
Payor) or (2) any other bona fide corporate purpose, but then only for
a period not to exceed 90 days;
(B) prepare
and file with the Commission such amendments and post-effective amendments
to a
registration statement as may be necessary to keep such registration statement
effective for up to nine months; and cause the related prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be
filed to the extent required pursuant to Rule 424 promulgated under the
Securities Act, during such nine month period; and otherwise comply with the
provisions of the Securities Act with respect to the disposition of all
Registerable Securities covered by such registration statement during the
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applicable
period in accordance with the intended method(s) of disposition of such
Registerable Securities set forth in such registration statement, prospectus
or
supplement to such prospectus;
(C) notify
the Rightsholders whose Registerable Securities are included in such
registration statement and the managing underwriter(s), if any, of an
underwritten offering of any of the Registerable Securities included in such
registration statement, and confirm such advice in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (2) of any request by the
Commission for amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the Commission
of any stop order suspending the effectiveness of a registration statement
or
the initiation of any proceedings for that purpose, (4) of the receipt by the
Payor of any notification with respect to the suspension of the qualification
of
any of the Registerable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (5) of the
happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the registration statement
or prospectus so that such registration statement, prospectus or document
incorporated by reference will not contain any untrue statement of material
fact
or omit to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading;
(D) use
reasonable efforts to obtain the withdrawal of any order suspending the
effectiveness of such registration statement at the earliest possible moment
and
to prevent the entry of such an order;
(E) use
reasonable efforts to register or qualify the Registerable Securities included
in such registration statement under such other securities or blue sky laws
of
such jurisdictions as any Rightsholder whose Registerable Securities are
included in such registration statement reasonably requests in writing and
do
any and all other acts and things which may be necessary or advisable to enable
such Rightsholder to consummate the disposition in such jurisdictions of such
Registerable Securities; provided, that the Payor will not be required to
(1) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this clause (E), (2) subject itself
to
taxation in any such jurisdiction or (3) take any action which would subject
it
to general service of process in any such jurisdiction;
(F) make
available for inspection by each Rightsholder whose Registerable Securities
are
included in such registration, any underwriter(s) participating in any
disposition pursuant to such registration statement, and any representative,
agent or employee of or attorney or accountant retained by any such Rightsholder
or underwriter(s) (collectively, the “Inspectors”), all financial and other
records, pertinent corporate documents and properties of the Payor
(collectively, the “Records”) as shall be reasonably necessary to enable them to
exercise their due diligence responsibility (or establish a due diligence
defense), and cause the officers, directors and employees of the Payor to supply
all information reasonably requested by any such Inspector in connection with
such registration statement; provided, that records which the Payor
determines, in good faith, to be confidential and which it notifies the
10
Inspectors
are confidential shall not be disclosed by the Inspectors, unless (1) the
release of such Records is ordered pursuant to a subpoena or other order from
a
court of competent jurisdiction or (2) the disclosure of such Records is
required by any applicable law or regulation or any governmental regulatory
body
with jurisdiction over such Rightsholder or underwriter; provided,
further, that such Rightsholder or underwriter(s) agree that such
Rightsholder or underwriter(s) will, upon learning the disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Payor
and allow the Payor, at the Payor’s expense, to undertake appropriate action to
prevent disclosure of the Records deemed confidential;
(G) cooperate
with the Rightsholder whose Registerable Securities are included in such
registration statement and the managing underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing Registerable
Securities to be sold thereunder, not bearing any restrictive legends, and
enable such Registerable Securities to be in such denominations and registered
in such names as such Rightsholder or any managing underwriter(s) may reasonably
request at least two business days prior to any sale of Registerable
Securities;
(H) comply
with all applicable rules and regulations of the Commission and promptly make
generally available to its security holders an earnings statement covering
a
period of twelve months commencing, (1) in an underwritten offering, at the
end
of any fiscal quarter in which Registerable Securities are sold to
underwriter(s), or (2) in a non-underwritten offering, with the first month
of
the Payor’s first fiscal quarter beginning after the effective date of such
registration statement, which earnings statement in each case shall satisfy
the
provisions of Section 11(a) of the Securities Act;
(I) provide
a CUSIP number for all Registerable Securities not later than the effective
date
of the registration statement relating to the first public offering of
Registerable Securities of the Payor pursuant hereto;
(J) enter
into such customary agreements (including an underwriting agreement in customary
form) and take all such other actions reasonably requested by the Rightsholders
holding a majority of the Registerable Securities included in such registration
statement or the managing underwriter(s) in order to expedite and facilitate
the
disposition of such Registerable Securities and in such connection, whether
or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (1) make such representations
and
warranties, if any, to the holders of such Registerable Securities and any
underwriter(s) with respect to the registration statement, prospectus and
documents incorporated by reference, if any, in form, substance and scope as
are
customarily made by issuers to underwriter(s) in underwritten offerings and
confirm the same if and when requested, (2) obtain opinions of counsel to the
Payor and updates thereof addressed to each such Rightsholder and the
underwriter(s), if any, with respect to the registration statement, prospectus
and documents incorporated by reference, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Rightsholders and
underwriter(s), (3) obtain a “cold comfort” letter and updates thereof from the
Payor’s independent certified public accountants addressed to such Rightsholders
and to the underwriter(s), if any, which letters shall be in customary form
and
cover matters of the type customarily covered in “cold comfort” letters by
accountants in
11
connection
with underwritten offerings, and (4) deliver such documents and certificates
as
may be reasonably requested by the Rightsholders holding a majority of such
Registerable Securities and managing underwriter(s), if any, to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Payor; each such action required by
this
clause (J) shall be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder; and
(K) if
requested by the holders of a majority of the Registerable Securities included
in such registration statement, use its best efforts to cause all Registerable
Securities which are included in such registration statement to be listed,
subject to notice of issuance, by the date of the first sale of such
Registerable Securities pursuant to such registration statement, on each
securities exchange, if any, on which securities similar to the Registered
Securities are listed.
(2) Obligations
of Rightsholders. In connection with any registration of
Registerable Securities of a Rightsholder pursuant to Section 9.2
hereof:
(A) The
Payor may require that each Rightsholder whose Registerable Securities are
included in such registration statement furnish to the Payor such information
regarding the distribution of such Registerable Securities and such Rightsholder
as the Payor may from time to time reasonably request in writing;
and
(B) Each
Rightsholder, upon receipt of any notice from the Payor of the happening of
any
event of the kind described in subclauses (2), (3), (5) and (6) of Section
9.3(1)(C), shall forthwith discontinue disposition of Registerable Securities
pursuant to the registration statement covering such Registerable Securities
until such Rightsholder’s receipt of the copies of the supplemented or amended
prospectus contemplated by subclause (1) of Paragraph 9.3(1)(C), or until such
Rightsholder is advised in writing (the “Advice”) by the Payor that the use of
the applicable prospectus may be resumed, and until such Rightsholder has
received copies of any additional or supplemental filings which are incorporated
by reference in or to be attached to or included with such prospectus, and,
if
so directed by the Payor, such Rightsholder will deliver to the Payor (at the
expense of the Payor) all copies, other than permanent file copies then in
the
possession of such Rightsholder, of the current prospectus covering such
Registerable Securities at the time of receipt of such notice; the Payor shall
have the right to demand that such Rightsholder or other holder verify its
agreement to the provisions of this clause (B) in any Holder Notice of the
Rightsholder or in a separate document executed by the
Rightsholder.
9.4. Registration
Expenses. All expenses incident to the performance of or
compliance with this Agreement by the Payor, including, without imitation,
all
registration and filing fees of the Commission, NASD, Inc. and other agencies,
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registerable Securities), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing, if any, of the Registerable Securities on any securities exchange
and fees and disbursements of counsel for the Payor and
12
the
Payor’s independent certified public accountants (including the expenses of any
special audit or “cold comfort” letters required by or incidental to such
performance), Securities Act or other liability insurance (if the Payor elects
to obtain such insurance), the fees and expenses of any special experts retained
by the Payor in connection with such registration and the fees and expenses
of
any other person retained by the Payor (but not including any underwriting
discounts or commissions attributable to the sale of Registerable Securities
or
other out-of-pocket expenses of the Rightsholders, or the agents who act on
their behalf, unless reimbursement is specifically approved by the Payor) will
be borne by the Payor. All such expenses are herein referred to as
“Registration Expenses.”
9.5. Indemnification:
Contribution.
(1) Indemnification
by the Payor. The Payor agrees to indemnify and hold harmless, to
the full extent permitted by law, each Rightsholder, its officers and directors
and each person who controls such Rightsholder (within the meaning of the
Securities Act), if any, and any agent thereof against all losses, claims,
damages, liabilities and expenses incurred by such party pursuant to any actual
or threatened suit, action, proceeding or investigation (including reasonable
attorney’s fees and expenses of investigation) arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission
or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in
the
light of the circumstances under which they were made) not misleading, except
insofar as the same arise out of or are based upon, any such untrue statement
or
omission based upon information with respect to such Rightsholder furnished
in
writing to the Payor by such Rightsholder expressly for use
therein.
(2) Indemnification
by Rightsholder. In connection with any registration statement in
which a Rightsholder is participating, each such Rightsholder will be required
to furnish to the Payor in writing such information with respect to such
Rightsholder as the Payor reasonably requests for use in connection with any
such registration statement or prospectus, and each Rightsholder agrees to
the
extent it is such a holder of Registerable Securities included in such
registration statement, and each other such holder of Registerable Securities
included in such Registration Statement will be required to agree, to indemnify,
to the full extent permitted by law, the Payor, the directors and officers
of
the Payor and each person who controls the Payor (within the meaning of the
Securities Act) and any agent thereof, against any losses, claims, damages,
liabilities and expenses (including reasonable attorney’s fees and expenses of
investigation incurred by such party pursuant to any actual or threatened suit,
action, proceeding or investigation arising out of or based upon any untrue
or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact necessary, to make the statements therein (in the case of
a
prospectus, in the light of the circumstances under which they are made) not
misleading, to the extent, but only to the extent, that such untrue statement
or
omission is based upon information relating to such Rightsholder or other holder
furnished in writing to the Payor expressly for use therein.
(3) Conduct
of Indemnification Proceedings. Promptly after receipt by an indemnified
party under this Section 9.5 of written notice of the commencement of any
action, proceeding, suit or investigation or threat thereof made in writing
for
which such indemnified party may claim indemnification or contribution pursuant
to this Note, such
13
indemnified
party shall notify in writing the indemnifying party of such commencement or
threat; but the omission so to notify the indemnifying party shall not relieve
the indemnifying party from any liability which the indemnifying party may
have
to any indemnified party (A) hereunder, unless the indemnifying party is
actually prejudiced thereby, or (B) otherwise than under this Section
9.5. In case any such action, suit or proceeding shall be brought
against any indemnified party, and the indemnified party shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall
be
entitled to participate therein and the indemnifying party shall assume the
defense thereof, with counsel reasonably satisfactory to the indemnified party,
and the obligation to pay all expenses relating thereto. The
indemnified party shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (A) the indemnifying party has agreed to pay such fees and
expenses, (B) the indemnifying party shall have failed to assume the defense
of
such action, suit or proceeding or to employ counsel reasonably satisfactory
to
the indemnified party therein or to pay all expenses relating thereto or (C)
the
named parties to any such action or proceeding (including any impleaded parties)
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one
or
more legal defenses available to the indemnified party which are different
from
or additional to those available to the indemnifying party and which may result
in a conflict between the indemnifying party and such indemnified party (in
which case, if the indemnified party notifies the indemnifying party in writing
that the indemnified party elects to employ separate counsel at the expense
of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action or proceeding on behalf of the indemnified
party; it being understood, however, that the indemnifying party shall not,
in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances,
be
liable for the fees and expenses of more than one separate firm of attorneys
at
any time for the indemnified party, which firm shall be designated in writing
by
the indemnified party).
(4) Contribution. If
the indemnification provided for in this Section 9.5 from the indemnifying
party
is unavailable to an indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (A) in such proportion
as is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other or (B) if the
allocation provided by clause (A) above is not permitted by applicable law,
in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party
on
the other but also the relative fault of the indemnifying party and indemnified
party, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and the indemnified parties shall
be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates
to
information supplied by, such indemnifying party or indemnified parties, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses referred
to
above shall be deemed to include, subject to
14
the
limitation set forth in Section 9.5, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The
parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 9.5(4) were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in clauses
(A) and (B) of the immediately preceding paragraph. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(E) Limitation. Notwithstanding
anything to the contrary contained in this Section 9.5, no holder of
Registerable Securities shall be liable for indemnification and contribution
payments aggregating an amount in excess of the maximum amount received by
such
holder in connection with any sale of Registerable Securities as contemplated
herein.
9.6. Participation
in Underwritten Registration. No Rightsholder may participate in
any underwritten registration hereunder unless such Rightsholder (i) agrees
to
sell such holder’s securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and to comply with Regulation M under the Exchange Act and (ii)
completes and executes all questionnaires, appropriate and limited powers of
attorney, escrow agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangement;
provided, that all such documents shall be consistent with the provisions
of Section 9.5
10. Unconditional
Obligation; Fees, Waivers, Other.
10.1. 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.
10.2. 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 reasonable costs
and expenses incurred by Payee in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements.
10.3. 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.
10.4. This
Note may not be modified or discharged (other than by payment) except by a
writing duly executed by Xxxxx and Xxxxx.
15
10.5. 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.
11. Subordination. This
Note is subordinated in right of payment to Institutional Indebtedness
(hereinafter defined), which includes any principal of, premium, if any, or
interest on indebtedness of Payor except Institutional Indebtedness, which,
by
its terms, is not superior in right of payment to the Notes. For the
purposes of this Note, the term Institutional Indebtedness shall mean all
existing and future indebtedness incurred (a) by the Payor to banks, insurance
companies, lease financing institutions, or other lending institutions (other
than small business investment companies or venture capital firms) regularly
engaged in the business of lending money; and (b) any amendment, renewal,
extension or refunding of any such debt. Each Noteholder by accepting
a Note agrees to the subordination and authorizes Payor to give it
effect.
12. Restriction
on Transfer. This Note has been
acquired for investment, and neither this Note nor any of the Conversion Shares
issuable pursuant to Section 8 have been registered under the securities laws
of
the United States of America or any state thereof. Accordingly, no
interest in this Note may be offered for sale, sold or transferred in the
absence of registration and qualification of this Note, or the Conversion
Shares, as the case may be, under applicable federal and state securities laws
or an opinion of counsel of Payee reasonably satisfactory to Payor that such
registration and qualification are not required.
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.
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 New York
without giving effect to the choice of laws rules thereof.
13.4. This
Note shall bind Payor and its successors and assigns.
16
|
By:
|
/s/
Xxxxxxx Xxxxxxx
|
||
|
Name:
|
Xxxxxxx
Xxxxxxx
|
||
|
Title:
|
Chief
Executive Officer
|
||
Accepted
and Agreed to:
/s/
Xxxxx X.
Xxxxxxx
SURRY
X.
XXXXXXX
17
NOTE
EXERCISE FORM
Dated:
_______________________
TO: WinSonic
Digital Media Group, Ltd.
I,
________Surry X.
Xxxxxxx_____, hereby irrevocably elect to convert my Promissory Note dated
_______________ in the amount of ______________, plus the accrued interest
in
the amount of ____________, into ______ shares of Common Stock of Winsonic
Digital Media Group, Ltd. pursuant to Section [insert applicable Section]of
said
Promissory Note.
I
acknowledge that said shares will be restricted shares pursuant to the
Securities Act of 1933, as amended, and as such, cannot be resold, assigned,
pledged, hypothecated or otherwise transferred without an effective registration
statement for such shares or other exemption from registration.
| INFORMATION REQUIRED FOR REGISTRATION OF STOCK | |||
|
Name:
|
XXXXX X. XXXXXXX | ||
| (Please type or print in block letters) | |||
|
Tax
ID/SS #:
|
|||
|
Address:
|
000 Xxxxxxxx Xxxx | ||
| Raleigh, NC 27605 | |||
|
Signature:
|
|||
|
(Signature
must conform in all respects to the name of the Noteholder as set
forth on
the face of this Note.)
|
|||
18
