EXHIBIT A
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
No. 1 $_____________
FUSION NETWORKS HOLDINGS INC.
12% CONVERTIBLE BRIDGE LOAN NOTE
DUE DECEMBER 31, 2000
THIS NOTE is one of a series of duly authorized and issued notes of Fusion
Networks Holdings, Inc., a Delaware corporation, having a principal place of
business at 0000 XX 00xx Xxxxxx, Xxxxx, XX 00000 (the "Company"), designated as
its 12% Convertible Bridge Loan Notes, due December 31, 2000, in the aggregate
principal amount of up to One Million Five Hundred Thousand Dollars ($1,500,000)
(the "Notes").
FOR VALUE RECEIVED, the Company promises to pay to [ ], or its registered
assigns (the "Holder"), the principal sum of __________ Dollars (__________), on
December 31, 2000 or such earlier date as the Notes are required or permitted to
be repaid as provided hereunder (the "Maturity Date") and to pay interest to the
Holder on the aggregate unconverted and then outstanding principal amount of
this Note at the rate of 12% per annum, payable on the Maturity Date in cash,
or, at Holder's option, in five year warrants ("the "Warrants") to purchase
shares of Common Stock (as defined in Section 6) at an exercise price equal to
150% of the closing price of the Company's Common Stock on the last trading day
preceding the execution of this Note. In the event that the Holder elects to
receive Warrants in lieu of interest, the number of Warrants to be issued shall
equal the product of (I) 50,000 multiplied by (II) the quotient determined by
dividing (a) the product of (i) the principal amount of this Note multiplied by
(ii) the product of (x) the number of days elapsed from the Original Issue Date
until the earlier of the Maturity Date or the Conversion Date multiplied by (y)
the quotient determined by dividing 0.12 by 360, by (b) 90,000. Subject to the
terms and conditions herein, the decision whether to receive interest hereunder
in Warrants or cash shall be at the discretion of the Holder. Not less than ten
Trading Days (as defined in Section 6) prior to the earlier of Maturity Date or
the Conversion Date (as defined in Section 4(a)(I)(B)), the Holder shall provide
the Company with written notice of its election to receive interest hereunder
either in cash orWarrants. Failure to timely provide such written notice shall
be deemed an election by the Holder to receive the interest on Maturity Date or
Conversion Date, in Warrants. Interest shall be calculated on the basis on a 30
day month and shall accrue daily commencing on the Original Issue Date (as
defined in Section 6) until payment in full of the principal sum, together with
all accrued and unpaid interest and other amounts which may become due
hereunder, has been made. Interest hereunder will be paid to the Person (as
defined in Section 6) in whose name this Note is registered on the records of
the Company regarding registration and transfers of Notes (the "Note Register").
All overdue accrued and unpaid interest to be paid in cash hereunder shall
entail a late fee at the rate of 18% per annum (or such lower maximum amount of
interest permitted to be charged under applicable law) (to accrue daily, from
the date such interest is due hereunder through and including the date of
payment), payable in cash.
This Note is subject to the following additional provisions:
Section 1. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
Section 2. This Note has been issued subject to certain investment
representations of the original Holder set forth in the Loan Agreement (as
defined in Section 6) and may be transferred or exchanged only in compliance
with the Loan Agreement and the legend set forth on the face of this Note. Prior
to due presentment to the Company for transfer of this Note, the Company and any
agent of the Company may treat the Person (as defined in Section 6) in whose
name this Note is duly registered on the Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Note is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) any default in the payment of the principal of, interest on
or liquidated damages in respect of, any Notes, free of any claim of
subordination, as and when the same shall become due and payable
(whether on a Conversion Date or the Maturity Date or by acceleration
or otherwise);
(ii) the Company shall fail to observe or perform any other
material covenant or agreement contained in, or otherwise commit any
breach of any of the Transaction Documents (as defined in Section 6),
and such failure or breach shall not have been remedied within five
days after the date on which notice of such failure or breach shall
have been given, or any representation or warranty of the Company in a
Transaction Document shall prove to have been false or incorrect at
the Closing Date;
(iii) the Company, shall commence, or there shall be commenced
against the Company a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, or the Company, commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the
Company, or there is commenced against the Company, any such
bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or the Company, is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company, suffers any appointment
of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of 60
days; or the Company, makes a general assignment for the benefit of
creditors; or the Company, shall fail to pay, or shall state that it
is unable to pay, or shall be unable to pay, its debts generally as
they become due; or the Company, shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of
its debts; or the Company, shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in any
of the foregoing; or any corporate or other action is taken by the
Company, for the purpose of effecting any of the foregoing;
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(iv) the Company (or any subsidiary thereof if guaranteed by the
Company) shall default in any of its obligations under any other Note
or any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement of the Company in an amount exceeding
an aggregate of one hundred thousand dollars ($100,000), whether such
indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable;
(v) the Common Stock shall be delisted from the Nasdaq National
Market ("NASDAQ") or suspended from trading on the NASDAQ without
resuming trading and/or being relisted or thereon or listed on the New
York Stock Exchange, American Stock Exchange or Nasdaq SmallCap Market
(each, a "Subsequent Market") or having such suspension lifted, in
either case, for more than ten Trading Days (which need not be
consecutive Trading Days);
(vi) the Company shall be a party to any Change of Control
Transaction (as defined in Section 6), shall agree to sell or dispose
all or in excess of 60% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase more than a de minimis
number of shares of Common Stock or other equity securities of the
Company (other than redemptions of Underlying Shares (as defined in
Section 6));
(vii) the Company shall fail for any reason to deliver
certificates to a Holder prior to the tenth day after a Conversion
Date pursuant to and in accordance with Section 4(b) or the Company
shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms
hereof; or
(viii) the Company shall fail for any reason to deliver the
payment in cash pursuant to a Buy-In (as defined herein) within seven
days after notice is delivered hereunder.
(b) During the time that any portion of this Note remains outstanding, if
any Event of Default occurs and is continuing, the full principal amount of this
Note (and, at the Holder's option, all other Notes then held by such Holder),
together with interest and other amounts owing in respect thereof, to the date
of acceleration shall become, at the Holder's election immediately due and
payable in cash. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Xxxxxx at any
time prior to payment hereunder. No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent thereon.
(c) In the event that this Note is not paid in full on or before the
Maturity Date, in addition to its other rights and remedies hereunder, (i) the
Company will pay to the Holder a late payment fee in an amount equal to 2% of
the unpaid principal balance (or such lesser maximum amount that is permitted to
be paid by applicable law) for each month any amount remains unpaid following
the Maturity Date, to accrue daily from the Maturity Date through and including
the date of payment, and (ii) the Company will issue to the Holder one warrant
for each $4.00 of principal balance of this Note remaining outstanding on the
Maturity Date, which warrant shall be exercisable for a period of five years at
an exercise price equal to 150% of the closing price of the Common Stock on the
Maturity Date.
3
Section 4. Conversion.
(a) (i) Conversion at Option of Holder. (A) This Note shall be convertible,
at the option of the Holder, into securities of the Company as follows: (1) in
the event that the Company completes a private placement of securities (the
"Private Placement") while any portion of this Note remains outstanding, the
principal amount of the Note remaining outstanding may be converted, in part or
in whole, into securities of the Company on terms identical to those of the
Private Placement, or (2) in the event that a Private Placement has not occurred
while this Note remains outstanding, and the Holder wishes to convert the Note,
then the Holder shall have the right to convert the outstanding principal
balance of this Note into a number of shares of Common Stock determined by
dividing (x) the outstanding principal amount of this Note to be converted by
(y) the average of the closing prices for the Company's Common Stock as quoted
on the Nasdaq National Market System for the five business days prior to the
Original Issue Date (subject to adjustments as set forth herein) (the
"Conversion Price"). In addition to receiving such number of shares of Common
Stock upon conversion of the Note, Holder will receive one warrant (the
"Conversion Warrants") for each four shares of Common Stock received on the
Conversion Date. Each Conversion Warrant will be exercisable for a period of
five years from the date of issuance at a price equal to 150% of the Conversion
Price.
(B) The Holder shall effect conversions by surrendering the Notes (or such
portions thereof) to be converted, together with the form of conversion notice
attached hereto as Exhibit A (a "Conversion Notice") to the Company. Each
Conversion Notice shall specify the principal amount of Notes to be converted,
the applicable Conversion Price and the date on which such conversion is to be
effected, which date may not be prior to the date such Conversion Notice is
deemed to have been delivered hereunder (a "Conversion Date"). If no Conversion
Date is specified in a Conversion Notice, the Conversion Date shall be the date
that such Conversion Notice is deemed delivered hereunder. Subject to Section
4(b), each Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the Note(s)
tendered by the Holder with the Conversion Notice, or if a conversion hereunder
cannot be effected in full for any reason, the Company shall honor such
conversion to the extent permissible hereunder and shall promptly deliver to
such Holder (in the manner and within the time set forth in Section 4(b)) a new
Note for such principal amount as has not been converted.
(ii) Certain Conversion Restrictions. A Holder may not convert Notes
hereunder to the extent such conversion would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act (as defined in Section 6)
and the rules promulgated thereunder) in excess of 4.999% of the then
issued and outstanding shares of Common Stock, including shares issuable
upon conversion of the Notes held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company
the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular conversion
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of
the principal amount of Notes are convertible shall be the responsibility
and obligation of the Holder. If the Holder has delivered a Conversion
Notice for a principal amount of Notes that, without regard to any other
shares that the Holder or its affiliates may beneficially own, would result
in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the conversion for the
maximum principal amount permitted to be converted on such Conversion Date
in accordance with the periods described in Section 4(b) and, at the option
of the Holder, either retain any principal amount tendered for conversion
in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any
other Holder) upon not less than 61 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
4
(b) (i) Not later than three Trading Days after any Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
bear restrictive legends and trading restrictions (as required by the Loan
Agreement) representing the number and nature of securities being acquired upon
the conversion of Notes, (ii) Notes in a principal amount equal to the principal
amount of Notes not converted, and (iii) if the Holder elects to receive
Warrants in lieu of interest, a certificate or certificates evidencing the
Warrants, or, if the Holder elects to receive cash in payment of accrued
interest, a bank check in the amount of accrued and unpaid interest provided,
that the Company shall not be obligated to issue certificates evidencing the
securities issuable upon conversion of the principal amount of Notes until Notes
are delivered for conversion to the Company, or the Holder notifies the Company
that such Notes have been lost, stolen or destroyed and provides a bond (or
other adequate security) reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection therewith. If in the case of
any Conversion Notice such certificate or certificates are not delivered to or
as directed by the applicable Holder by the third Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the principal amount of Notes tendered for conversion.
(ii) If the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, 0.05% of the principal amount to
be converted for each Trading Day after such third Trading Day until such
certificates are delivered. Nothing herein shall limit a Holder's right to
pursue actual damages or declare an Event of Default pursuant to Section 3
herein for the Company's failure to deliver certificates representing
securities upon conversion within the period specified herein and such
Holder shall have the right to pursue all remedies available to it at law
or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall
not prohibit the Holders from seeking to enforce damages pursuant to any
other Section hereof or under applicable law. Further, if the Company shall
not have delivered any cash due in respect of conversions of Notes or as
payment of interest thereon by the third Trading Day after the Conversion
Date, the Holder may, by notice to the Company, require the Company to
issue securities pursuant to Section 4(a), except that for such purpose the
Conversion Price applicable thereto shall be the lesser of the Conversion
Price on the Conversion Date and the Conversion Price on the date of such
Holder demand. Any such securities will be subject to the provision of this
Section.
(iii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4(b)(i) by the third Trading Day after the Conversion
Date, and if after such third Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of
a sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall (A) pay
in cash to the Holder (in addition to any remedies available to or elected
by the Holder) the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common
Stock that such Holder anticipated receiving from the conversion at issue
multiplied by (2) the market price of the Common Stock at the time of the
sale giving rise to such purchase obligation and (B) at the option of the
Holder, either reissue Notes in principal amount equal to the principal
amount of the attempted conversion or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company timely
complied with its delivery requirements under Section 4(b)(i). For example,
if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of Notes
with respect to which the market price of the Underlying Shares on the date
of conversion was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the Company to make
payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages
under Section 4(b)(ii) in respect of the certificates resulting in such
Buy-In.
5
(c) (i) If the Company, at any time while any Notes are outstanding, (a)
shall pay a stock dividend or otherwise make a distribution or distributions on
shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(ii) If the Company, at any time while Notes are outstanding, shall
distribute to all holders of Common Stock (and not to Holders) evidences of
its indebtedness or assets or rights or warrants to subscribe for or
purchase any security, then in each such case the Conversion Price at which
Notes shall thereafter be convertible shall be determined by multiplying
the Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Closing Price determined
as of the record date mentioned above, and of which the numerator shall be
such Closing Price on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(iii) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holders shall have the right
thereafter to convert the then outstanding principal amount, together with
all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Note only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the
Common Stock following such reclassification or share exchange, and the
Holders of the Notes shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with
all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Note could have been converted immediately prior to such
reclassification or share exchange would have been entitled.
6
(iv) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. No
adjustments in the Conversion Price shall be required if such adjustment is
less than $0.01, provided, however, that any adjustments which by reason of
this Section are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
(v) Whenever the Conversion Price is adjusted pursuant to either
Section 4(c)(i) or (ii), the Company shall promptly mail to each Holder a
notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(vi) If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights; (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the
Company, of any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of the Notes, and shall cause to be mailed to the Holders at
their last addresses as they shall appear upon the stock books of the
Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange, provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
Holders are entitled to convert Notes during the 20-day period commencing
the date of such notice to the effective date of the event triggering such
notice.
(vii) In case of any (1) merger or consolidation of the Company with
or into another Person, or (2) sale by the Company of more than 60% of the
assets of the Company (on an as valued basis) in one or a series of related
transactions, a Holder shall have the right to (A) if permitted under
Section 3(b) hereof, exercise its rights of prepayment under Section 3(a)
with respect to such event, (B) convert its aggregate principal amount of
Notes then outstanding into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such
amount of securities, cash and property as the shares of Common Stock into
which such aggregate principal amount of Notes could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (C) in the case of a merger or consolidation, (x) require the
surviving entity to issue convertible debentures in such face amount, as
the case may be, equal to the aggregate principal amount of Notes then held
by such Holder, plus all accrued and unpaid interest and other amounts
owing thereon, which newly issued debentures shall have terms identical
(including with respect to conversion) to the terms of this Note and shall
be entitled to all of the rights and privileges of a Holder of Notes set
forth herein and the agreements pursuant to which the Notes were issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon conversion thereof), and (y) simultaneously with
the issuance of such convertible debentures, shall have the right to
convert such instrument only into shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common
Stock following such merger or consolidation. In the case of clause (C),
the conversion price applicable for the newly issued shares of convertible
preferred stock or convertible debentures shall be based upon the amount of
securities, cash and property that each share of Common Stock would receive
in such transaction and the Conversion Price in effect immediately prior to
the effectiveness or closing date for such transaction. The terms of any
such merger, sale or consolidation shall include such terms so as to
continue to give the Holders the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption
following such event. This provision shall similarly apply to successive
such events.
7
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of the Notes, including shares
underlying the Warrants and Conversion Warrants, each as herein provided, free
from preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of the Common Stock
as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 4(b)) upon the
conversion of the outstanding principal amount of the Notes and payment of
interest hereunder. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid, and nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to issue
stock certificates representing fractions of shares of the Common Stock, but may
if otherwise permitted, make a cash payment in respect of any final fraction of
a share based on the Closing Price at such time. If the Company elects not, or
is unable, to make such a cash payment, the Holder shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for securities on conversion of the Notes
shall be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Notes so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the Company, at 0000 XX 00xx
Xxxxxx, Xxxxx, XX 00000 , Facsimile No.: (000) 000-0000, attention Chief
Financial Officer, or such other address or facsimile number as the Company may
specify for such purposes by notice to the Holders delivered in accordance with
this Section. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to each Holder at
the facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
6:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United States mail, (iv) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
8
Section 5. Prepayment.
(a) The Company shall have the right at any time, upon ten Trading Days'
notice to the Holders (a "Prepayment Notice" and the date such notice is
received by the Holders, the "Notice Date"), to prepay, in full or in part, the
principal amount of the Notes then held by the Holders at a cash price equal to
the principal amount to be prepaid plus all accrued interest thereon, subject to
the Holder's continuing right to receive Warrants in lieu of interest (the
"Prepayment Price"). The prepayment contemplated by this Section shall occur pro
rata among the Holders by reference to the original principal amount of Notes
acquired by all Holders on the Original Issue Date.
(b) The Prepayment Price is due on the tenth Trading Day following the
Notice Date (the "Prepayment Date"). If any portion of the Prepayment Price
shall not be paid by the Company by expiration of such tenth Trading Day,
interest shall accrue thereon at the rate of 18% per annum (or the maximum rate
permitted by applicable law, whichever is less) until the Prepayment Price plus
all such interest is paid in full. In addition, if any portion of the Prepayment
Price remains unpaid after such date, the Holders subject to such prepayment may
elect, by written notice to the Company given at any time thereafter, to
invalidate ab initio such prepayment, notwithstanding anything herein contained
to the contrary. If a Holder elects to invalidate such prepayment the Company
shall promptly, and, in any event, not later than three Trading Days from
receipt of such Xxxxxx's notice of such election, return to such Holder all of
the Notes for which the Prepayment Price shall not have been paid in full.
Notwithstanding anything herein to the contrary, the Holders may convert any
portion of the outstanding principal amount of this Note which is subject to a
Prepayment Notice on or before the Prepayment Date.
(c) If, prior to the Maturity Date, the Company receives net proceeds from
the Private Placement in an amount in excess of $4.5 million (the "Excess
Proceeds"), the Company shall, within five (5) business days following the
receipt of such Excess Proceeds, prepay the Notes, pro rata among the Holders by
reference to the original principal amount of the Notes, in an amount equal to
the lesser of the Excess Proceeds or the remaining outstanding principal amount
of the Notes plus accrued but unpaid interest. Such prepayment shall be applied
first to the payment of any accrued but unpaid interest on the Notes and then to
the outstanding principal.
Section 6. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York or the State of Florida are authorized or required by law or other
government action to close.
"Change of Control Transaction" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 40% of the
voting securities of the Company in a transaction or series of transactions not
approved by the Board of directors of the Company, (ii) a replacement at one
time or over time of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the members
of the board of directors who are members on the date hereof), (iii) the merger
of the Company with or into another entity that is not wholly-owned by the
Company, consolidation or sale of 60% or more of the assets of the Company in
one or a series of related transactions, or (iv) the execution by the Company of
an agreement to which the Company is a party or by which it is bound, providing
for any of the events set forth above in (i), (ii) or (iii).
9
"Closing Price" means on any particular date (a) the closing sales price
per share of Common Stock on such date on the NASDAQ or on such Subsequent
Market on which the shares of Common Stock are then listed or quoted, or if
there is no such price on such date, then the closing sales price on the NASDAQ
or on such Subsequent Market on the date nearest preceding such date, or (b) if
the shares of Common Stock are not then listed or quoted on the NASDAQ or a
Subsequent Market, the closing sales price for a share of Common Stock in the
OTC Bulletin Board, as reported by the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting prices)
at the close of business on such date, or (c) if the shares of Common Stock are
not then reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the Holder, or (d) if the shares of Common Stock are
not then publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser selected in good faith by the Holders of a majority
in interest of the principal amount of Notes then outstanding.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $.00001 par value per share, of the
Company and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Loan Agreement" means the Bridge Loan Agreement, dated as of the Original
Issue Date, to which the Company and the original Holder are parties, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Original Issue Date" shall mean the date of the first issuance of the
Notes regardless of the number of transfers of any Note and regardless of the
number of instruments which may be issued to evidence such Note.
"Person" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the shares of Common Stock are
traded on the NASDAQ or on such Subsequent Market on which the shares of Common
Stock are then listed or quoted, or (b) if the shares of Common Stock are not
listed on the NASDAQ or a Subsequent Market, a day on which the shares of Common
Stock are traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (c) if the shares of Common Stock are not quoted on the OTC Bulletin
Board, a day on which the shares of Common Stock are quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, that in the event that the shares of Common Stock
are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other government action to close.
"Transaction Documents" shall have the meaning set forth in the Loan Agreement.
10
"Underlying Shares" means the securities issuable upon conversion of Notes,
shares of Common Stock underlying warrants issuable upon conversion of Notes, or
the shares of Common Stock underlying warrants issuable as payment of interest
in accordance with the terms hereof.
Section 7. Except as expressly provided herein, no provision of this Note
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any)
on, this Note at the time, place, and rate, and in the coin or currency, herein
prescribed. This Note is a direct obligation of the Company. This Note ranks
pari passu with all other Notes now or hereafter issued under the terms set
forth herein. As long as there are Notes outstanding, the Company shall not and
shall cause it subsidiaries not to, without the consent of the Holders, (i)
amend its certificate of incorporation, bylaws or other charter documents so as
to adversely affect any rights of the Holders; (ii) repay, repurchase or offer
to repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing; or (iv) incur additional indebtedness,
other than indebtedness ranking junior to the Notes. The Company may only
voluntarily prepay the outstanding principal amount on the Notes in accordance
with Section 5 hereof.
Section 8. This Note shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
Section 9. If this Note shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution for a lost,
stolen or destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Note, and of the ownership hereof, and
indemnity, if requested, all reasonably satisfactory to the Company.
Section 10. No indebtedness of the Company, except for the 6% secured
Convertible Debentures in the original principal amount of $3,000,000, is senior
to this Note in right of payment, whether with respect to interest, damages or
upon liquidation or dissolution or otherwise. The Company will not and will not
permit any of its subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any indebtedness of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom that is senior to or pari
passu with the indebtedness under this Note.
Section 11. This Note shall be governed by and construed in accordance with
the laws of the State of Florida, without giving effect to conflicts of laws
thereof. The Company and the Holder hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Miami, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or that
such suit, action or proceeding is improper. Each of the Company and the Holder
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by receiving a copy thereof
sent to the Company at the address in effect for notices to it under this
instrument and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
11
Section 12. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must be
in writing.
Section 13. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Notes as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been enacted.
Section 14. Whenever any payment or other obligation hereunder shall be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
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12
IN WITNESS WHEREOF, the Company has caused this Collateralized Convertible
Bridge Loan Note to be duly executed by a duly authorized officer as of the date
first above indicated.
FUSION NETWORKS HOLDINGS, INC.
By:
--------------------------
Name:
Title:
13
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby elects to convert the attached Note into securities of
Fusion Networks Holdings Inc. (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.
Conversion calculations:
-------------------------------------------
Date to Effect Conversion
-------------------------------------------
Principal Amount of Notes to be Converted
-------------------------------------------
Title of Securities to be Issued
-------------------------------------------
Number of Securities to be Issued
-------------------------------------------
Conversion Price
-------------------------------------------
Signature
-------------------------------------------
Name
-------------------------------------------
Address
