Exhibit 4.1 - SECURED CONVERTIBLE TERM NOTE
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT&E INTERNATIONAL GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, IT&E INTERNATIONAL GROUP, INC., a California
corporation (the "COMPANY"), hereby promises to pay to LAURUS MASTER FUND,
LTD., M&C Corporate Services Limited, P.O. Box 309 GT, Xxxxxx House, South
Church Street, Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000
(the "PURCHASER") or its registered assigns or successors in interest, on
order, the sum of Five Million Dollars ($5,000,000), together with any accrued
and unpaid interest hereon, on October 18, 2007 (the "MATURITY DATE") if not
sooner paid. The original principal amount of this Note subject to amortizing
payments pursuant to Section 1.2 hereof is hereinafter referred to as the
"AMORTIZING PRINCIPAL AMOUNT" and the remaining original principal amount of
this Note is hereinafter referred to as the "NON-AMORTIZING PRINCIPAL AMOUNT."
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as
of the date hereof between the Company and the Purchaser (the "PURCHASE
AGREEMENT").
The principal amount of this Note that is contained in the Restricted
Account (as defined in the Restricted Account Agreement referred to in the
Purchase Agreement) on the date of the issuance of this Note is $2,500,000.
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1 (a) Interest Rate. Subject to Sections 1.1(b), 4.12 and 5.6
hereof, interest payable on this Note shall accrue at a rate per annum (the
"INTEREST RATE") equal to the "prime rate" published in The Wall Street Journal
from time to time, plus two and one half percent (2.50%). The Interest Rate
shall be increased or decreased as the case may be for each increase or
decrease in the prime rate in an amount equal to such increase or decrease in
the prime rate; each change to be effective as of the day of the change in such
rate. Subject to Section 1.1(b) hereof, the Interest Rate shall not be less
than seven and one quarter percent (7.25%). Interest shall be calculated on
the basis of a 360 day year. Interest on the Amortizing Principal Xxxxxx shall
be payable monthly, in arrears, commencing on November 1, 2004 and on the
first day of each consecutive calendar month thereafter (each, a "REPAYMENT
DATE") and on the Maturity Date, whether by acceleration or otherwise. Accrued
interest on the Non-Amortizing Principal Amount shall be payable only on the
Maturity Date or, in the event of the redemption or conversion of all or any
portion of the Non-Amortizing Principal Amount, accrued interest on the amount
so redeemed or converted shall be paid on the date of redemption or conversion,
as the case may be.
1.1 (b) Interest Rate Adjustment. The Interest Rate shall be subject
to adjustment on the last business day of each month hereafter until the
Maturity Date (each a "DETERMINATION DATE"). If on any Determination Date the
Company shall have registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the shares of Common Stock underlying each of the conversion
of this Note and the exercise of the Warrant issued on a registration statement
declared effective by the Securities and Exchange Commission (the "SEC"), and
the market price (the "MARKET PRICE") of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as defined below) for the five (5)
consecutive trading days immediately preceding such Determination Date exceeds
the then applicable Fixed Conversion Price by at least twenty five percent
(25%), the Interest Rate for the succeeding calendar month shall automatically
be reduced by 200 basis points (200 b.p.) (2.0.%) for each incremental twenty
five percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price if the Company shall have listed the
shares of Common Stock underlying each of the conversion of this Note and the
exercise of the Warrant on the American Stock Exchange, the Nasdaq SmallCap
Market or the Nasdaq National Market for trading on such any such exchange.
If on any Determination Date the Company shall have registered under the
Securities Act the shares of Common Stock underlying the conversion of this
Note and the exercise of the Warrant on a registration statement declared
effective by the SEC, and the Market Price of the Common Stock as reported by
Bloomberg, L.P. on the NASD Over the Counter Bulletin Board for the five (5)
consecutive trading days immediately preceding such Determination Date exceeds
the then applicable Fixed Conversion Price by at least twenty five percent
(25%), the Interest Rate for the succeeding calendar month shall automatically
be decreased by 100 basis points (100 b.p.) (1.0.%) for each incremental twenty
five percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price. Notwithstanding the foregoing (and
anything to the contrary contained in herein), in no event shall the Interest
Rate be less than zero percent (0%).
1.2 Minimum Monthly Principal Payments. Amortizing payments of the
outstanding principal amount of this Note not contained in the Restricted
Account (as defined in the Restricted Account Agreement) shall begin on May 1,
2005 and shall recur on each succeeding Repayment Date thereafter until the
Amortizing Principal Amount has been repaid in full, whether by the payment of
cash or by the conversion of such principal into Common Stock pursuant to the
terms hereof. Subject to Section 2.1 and Article 3 below, on each Repayment
Date, the Company shall make payments to the Purchaser in the amount of
$83,333.33 (the "MONTHLY PRINCIPAL AMOUNT"), together with any accrued and
unpaid interest then due on such portion of the Amortizing Principal Amount
plus any and all other amounts which are then due and owing under this Note
that have not been paid (the Monthly Principal Amount, together with such
accrued and unpaid interest and such other amounts, collectively, the "MONTHLY
AMOUNT"); provided that, following a release of an amount of funds from the
Restricted Account (as defined in the Restricted Account Agreement) for the
purposes set forth in the Restricted Account Side Letter (other than with
respect to a release that occurs as a result of a conversion of any Principal
Amount) (each, a "RELEASE AMOUNT") each Monthly Principal Amount due on any
Repayment Date following any such release shall be increased by an amount equal
to (x) such Release Amount divided by (y) the sum of (I) the number of
Repayment Dates remaining until the Maturity Date plus (II) one (1). Any
Principal Amount that remains outstanding on the Maturity Date shall be due and
payable on the Maturity Date.
ARTICLE II
CONVERSION REPAYMENT
2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the
Monthly Amount (or a portion thereof of such Monthly Amount if such portion of
the Monthly Amount would have been converted into shares of Common Stock but
for Section 3.2) is required to be paid in cash pursuant to Section 2.1(b),
then the Company shall pay the Purchaser an amount equal to one hundred three
percent (103%) of the Monthly Amount due and owing to the Purchaser on the
Repayment Date in cash. If the Monthly Amount (or a portion of such Monthly
Amount if not all of the Monthly Amount may be converted into shares of Common
Stock pursuant to Section 3.2) is required to be paid in shares of Common Stock
pursuant to Section 2.1(b), the number of such shares to be issued by the
Company to the Purchaser on such Repayment Date (in respect of such portion of
the Monthly Amount converted into in shares of Common Stock pursuant to Section
2.1(b)), shall be the number determined by dividing (x) the portion of the
Monthly Amount converted into shares of Common Stock, by (y) the then
applicable Fixed Conversion Price. For purposes hereof, the initial "FIXED
CONVERSION PRICE" means the lesser of $1.00 or an amount equal to 100% of the
average closing price of the Common Stock for the ten (10) trading days
immediately prior to the date of this Note. Notwithstanding the immediately
foregoing, in no event shall the Fixed Conversion Price set on the date hereof
exceed one hundred five percent (105%) of the closing price of the Common
Stock on the last trading day prior to the date hereof.
(b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, the Purchaser shall convert into shares of Common
Stock all or a portion of the Monthly Amount due on each Repayment according
to the following guidelines (collectively, the "CONVERSION CRITERIA"): (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) consecutive trading days immediately
preceding such Notice Date shall be greater than or equal to 110% of the Fixed
Conversion Price and (ii) the amount of such conversion does not exceed twenty
five percent (25%) of the aggregate dollar trading volume of the Common Stock
for the twenty two (22) day trading period immediately preceding the
applicable Repayment Date. If the Conversion Criteria are not met, the
Purchaser shall convert only such part of the Monthly Amount that meets the
Conversion Criteria. Any part of the Monthly Amount due on a Repayment Date
that the Purchaser has not been able to convert into shares of Common Stock due
to failure to meet the Conversion Criteria, shall be paid by the Company in
cash at the rate of 103% of the Monthly Amount otherwise due on such Repayment
Date, within three (3) business days of the applicable Repayment Date.
(c) Application of Conversion Amounts. Any amounts converted by
the Purchaser pursuant to Section 2.1(b) shall be deemed to constitute payments
of, or applied against, (i) first, outstanding fees, (ii) second, accrued
interest on the Amortizing Principal Xxxxxx, (iii) third, accrued interest on
the Non-Amortizing Principal Xxxxxx and (iv) fourth, the Amortizing Principal
Xxxxxx.
2.2 No Effective Registration. Notwithstanding anything to the
contrary herein, no amount payable hereunder may be converted into Common
Stock unless (a) either (i) an effective current Registration Statement (as
defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued in satisfaction of such obligations exists, or (ii) an
exemption from registration of the Common Stock is available pursuant to Rule
144 of the Securities Act and under the registration, permit or qualification
requirements of all applicable state securities laws, and (b) no Event of
Default hereunder exists and is continuing, unless such Event of Default is
cured within any applicable cure period or is otherwise waived in writing by
the Purchaser in whole or in part at the Purchaser's option.
2.3 Optional Redemption of Amortizing Principal Amount. The Company
will have the option of prepaying the outstanding Amortizing Principal Amount
("OPTIONAL AMORTIZING REDEMPTION"), in whole or in part, by paying to the
Purchaser a sum of money equal to one hundred twenty five percent (125%) of the
Amortizing Principal Amount to be redeemed, together with accrued but unpaid
interest thereon and any and all other sums due, accrued or payable to the
Purchaser arising under this Note, the Purchase Agreement or any Related
Agreement (the "AMORTIZING REDEMPTION AMOUNT") on the Amortizing Redemption
Payment Date (as defined below). The Company shall deliver to the Purchaser a
notice of redemption (the "NOTICE OF AMORTIZING REDEMPTION") specifying the
date for such Optional Amortizing Redemption (the "AMORTIZING REDEMPTION
PAYMENT DATE"), which date shall be not less than seven (7) business days after
the date of the Notice of Amortizing Redemption (the "REDEMPTION PERIOD"). A
Notice of Amortizing Redemption shall not be effective with respect to any
portion of the Amortizing Principal Amount for which the Purchaser has a
pending election to convert pursuant to Section 3.1, or for conversions
initiated or made by the Purchaser pursuant to Section 3.1 during the
Redemption Period. The Amortizing Redemption Amount shall be determined as if
such Purchaser's conversion elections had been completed immediately prior to
the date of the Notice of Amortizing Redemption. On the Amortizing Redemption
Payment Date, the Amortizing Redemption Amount shall be paid in good funds to
the Purchaser. In the event the Company fails to pay the Amortizing Redemption
Amount on the Amortizing Redemption Payment Date as set forth herein, then
such Notice of Amortizing Redemption will be null and void.
2.4 Optional Redemption of Non-Amortizing Principal Amount. The
Company will have the option of repaying the outstanding Non-Amortizing
Principal Amount ("OPTIONAL NON-AMORTIZING REDEMPTION"), in whole or in part,
by paying the Purchaser a sum of money equal to one hundred fifteen percent
(115%) of the Non-Amortizing Principal Amount to be redeemed, together with
accrued but unpaid interest thereon (the "NON-AMORTIZING REDEMPTION AMOUNT") on
the Non-Amortizing Redemption Date (as defined below). The Company shall
deliver to the Purchaser a written notice of redemption (the "NOTICE OF NON-
AMORTIZING REDEMPTION") specifying the date for such Optional Non-Amortizing
Redemption (the "NON-AMORTIZING REDEMPTION DATE"), which date shall be not less
than seven (7) business days after the date of the Notice of Non-Amortizing
Redemption (the "NON-AMORTIZING REDEMPTION PERIOD"). A Notice of Non-
Amortizing Redemption shall not be effective with respect to any portion of the
Non-Amortizing Principal Amount for which the Purchaser has a pending election
to convert pursuant to Section 3.1, or for conversions initiated or made by the
Purchaser pursuant to Section 3.1 during the Non-Amortizing Redemption Period.
The Non-Amortizing Redemption Amount shall be determined as if the Purchaser's
conversion elections had been completed immediately prior to the date of the
Notice of Non-Amortizing Redemption. On the Non-Amortizing Redemption Date,
the Non-Amortizing Redemption Amount shall be paid (i) in good funds to the
Purchaser, (ii) by furnishing the Purchaser written direction to notify the
bank holding the Restricted Account to release from the Restricted Account and
deliver to the Purchaser a sum of money equal to the Non-Amortizing Redemption
Amount, or (iii) if the amount on deposit in the Restricted Account is less
than the Non-Amortizing Redemption Amount, by furnishing the Purchaser written
direction to notify the bank holding the Restricted Account to release all
amounts on deposit in the Restricted Account to the Purchaser and delivering to
the Purchaser good funds in an amount equal to the balance of the Non-
Amortizing Redemption Amount.
2.5 Mandatory Conversion. Subject to Sections 2.2 and 3.2 hereof, if
(i) the average closing price of the Common Stock as reported by Bloomberg,
L.P. on the Principal Market for the five (5) consecutive trading days and is
greater than or equal to 400% of the Fixed Conversion Price, the Company may
deliver a written notice to the Purchaser (a "Mandatory Conversion Notice")
requiring the conversion into Common Stock of all or a portion of the
outstanding Principal Amount, provided however, that the amount of such
conversion set forth in the Mandatory Conversion Notice does not exceed twenty
percent (20%) of the aggregate dollar trading volume of the Common Stock for
the twenty two (22) day trading period immediately preceding the date of the
applicable Mandatory Conversion Notice (the "Mandatory Conversion Criteria").
If the Mandatory Conversion Criteria are not met, the Purchaser shall convert
only such portion of the outstanding Principal Amount that meets the Mandatory
Conversion Criteria.
ARTICLE III
CONVERSION RIGHTS
3.1. Purchaser's Conversion Rights. Subject to Section 2.2, the
Purchaser shall have the right, but not the obligation, to convert all or any
portion of the then aggregate outstanding principal amount of this Note (the
"Principal Amount"), together with interest and fees due hereon, into shares of
Common Stock, subject to the terms and conditions set forth in this Article
III. The Purchaser may exercise such right by delivery to the Company of a
written Notice of Conversion pursuant to Section 3.3. The shares of Common
Stock to be issued upon such conversion are herein referred to as the
"CONVERSION SHARES."
3.2 Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Purchaser shall not be entitled to convert pursuant to the
terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between 4.99% of the issued
and outstanding shares of Common Stock and the number of shares of Common Stock
beneficially owned by such Purchaser or issuable upon exercise of Warrants held
by such Purchaser. For the purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of
the Exchange Act and Regulation 13d-3 thereunder. The Purchaser may void the
Conversion Share limitation described in this Section 3.2 upon 75 days prior
notice to the Company or without any notice requirement upon an Event of
Default.
3.3 Mechanics of Purchaser's Conversion. (a) In the event that the
Purchaser elects to convert any amounts outstanding under this Note into Common
Stock, the Purchaser shall give notice of such election by delivering an
executed and completed notice of conversion (a "NOTICE OF CONVERSION") to the
Company, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees being converted. On
each Conversion Date (as hereinafter defined) and in accordance with its Notice
of Conversion, the Purchaser shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its records and shall
provide written notice thereof to the Company within two (2) business days
after the Conversion Date. Each date on which a Notice of Conversion is
delivered or telecopied to the Company in accordance with the provisions hereof
shall be deemed a "CONVERSION DATE". A form of Notice of Conversion to be
employed by the Purchaser is annexed hereto as Exhibit A.
(b) Pursuant to the terms of a Notice of Conversion, the Company
will issue instructions to the transfer agent accompanied by an opinion of
counsel, if so required by the Company's transfer agent, within one (1)
business day of the date of the delivery to Company of the Notice of Conversion
and shall cause the transfer agent to transmit the certificates representing
the Conversion Shares to the Purchaser by crediting the account of the
Purchaser's designated broker with the Depository Trust Corporation ("DTC")
through its Deposit Withdrawal Agent Commission ("DWAC") system within three
(3) business days after receipt by the Company of the Notice of Conversion (the
"DELIVERY DATE"). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been exercised
and the Conversion Shares issuable upon such conversion shall be deemed to have
been issued upon the date of receipt by the Company of the Notice of
Conversion. The Purchaser shall be treated for all purposes as the record
Purchaser of such shares of Common Stock, unless the Purchaser provides the
Company written instructions to the contrary.
3.4 Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon each
conversion of this Note pursuant to this Article III shall be determined by
dividing that portion of the Principal Amount and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price. In the event
of any conversions of outstanding obligations under this Note in part pursuant
to this Article III, such conversions shall be deemed to constitute conversions
(i) first, of the Monthly Amount for the current calendar month, (ii) then of
the accrued interest on the Non-Amortizing Principal Xxxxxx, (iii) then of
outstanding Amortizing Principal Amount, by applying the conversion amount to
Monthly Principal Amounts for the remaining Repayment Dates in chronological
order and (iv) then, of outstanding Non-Amortizing Principal Amount.
(b) The Fixed Conversion Price and number and kind of shares or
other securities to be issued upon conversion are subject to adjustment from
time to time upon the occurrence of certain events, as follows:
A. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is paid on the
Common Stock in shares of Common Stock, the Fixed Conversion Price or the
Conversion Price, as the case may be, shall be proportionately reduced in
case of subdivision of shares or stock dividend or proportionately
increased in the case of combination of shares, in each such case by the
ratio which the total number of shares of Common Stock outstanding
immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
B. During the period the conversion right exists, the
Company will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock
upon the full conversion of this Note. The Company represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Company agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents
who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for shares of Common
Stock upon the conversion of this Note.
C. Share Issuances. Subject to the provisions of this
Section 3.4, if the Company shall at any time prior to the conversion or
repayment in full of the Principal Amount issue any shares of Common
Stock or securities convertible into Common Stock to a person other than
the Purchaser (except (i) pursuant to Subsections A or B above; (ii)
pursuant to options, warrants or other obligations to issue shares
outstanding on the date hereof as disclosed to Purchaser in writing; or
(iii) pursuant to options that may be issued under any employee incentive
stock option and/or any qualified stock option plan adopted by the
Company) for a consideration per share (the "OFFER PRICE") less than the
Fixed Conversion Price in effect at the time of such issuance, then the
Fixed Conversion Price shall be immediately reset to such lower Offer
Price. For purposes hereof, the issuance of any security of the Company
convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price at the time of
issuance of such securities.
D. Reclassification, etc. If the Company at any time
shall, by reclassification or otherwise, change the Common Stock into the
same or a different number of securities of any class or classes, this
Note, as to the unpaid Principal Amount and accrued interest thereon,
shall thereafter be deemed to evidence the right to purchase an adjusted
number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.
3.5 Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall (in exchange for presentation of the Note for cancellation by the
Company), at the written request of the Purchaser, be issued by the Company to
the Purchaser for the outstanding Principal Amount of this Note and accrued
interest which shall not have been converted or paid. Subject to the provisions
of Article IV, the Company will pay no costs, fees or any other consideration
to the Purchaser for the production and issuance of a replacement Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable cure or grace period, the Purchaser may make all sums of principal,
interest and other fees then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable. In the event of such an
acceleration, the amount due and owing to the Purchaser shall be the sum of
(i) 125% of the outstanding Amortizing Principal Amount l of the Note and (ii)
115% of the outstanding Non-Amortizing Principal Amount of the Note,
respectively, ( each such amount to include accrued and unpaid interest and
fees, if any) (the "DEFAULT PAYMENT"). The Default Payment shall be applied
first to any fees due and payable to Purchaser pursuant to this Note, the
Purchase Agreement or the Related Agreements, then to accrued and unpaid
interest due on the Note and then to outstanding principal balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "EVENT OF DEFAULT":
4.1 Failure to Pay Principal, Interest or other Fees. (i) The Company
fails to pay when due, any installment of principal, interest or other fees
hereon in accordance herewith , or (ii) the Company fails to pay, when due,
any amount due (in excess of $100,000 in the aggregate at any time outstanding)
under any other promissory note issued by the Company and in any such case,
such failure shall continue for a period of three (3) days following the date
such payment was due .
4.2 Breach of Covenant. The Company breaches any covenant or any other
term or condition of this Note, the Purchase Agreement or any Related Agreement
in any material respect, and, in any such case, such breach, if subject to
cure, continues for a period of thirty (30) days after the occurrence thereof.
4.3 Breach of Representations and Warranties. Any representation or
warranty made by the Company in this Note, the Purchase Agreement or any
Related Agreement, shall, in any such case, be false or misleading in any
material respect on the date that such representation or warranty was made or
deemed made.
4.4 Receiver or Trustee. The Company shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or
such a receiver or trustee shall otherwise be appointed.
4.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against the Company or any of its property or other assets
for more than $100,000 and shall remain unvacated, unbonded or unstayed for a
period of thirty (30) days.
4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by the Company, or if against the
Company, such proceedings shall not dismissed within thirty (30) days.
4.7 Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Company shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "PRINCIPAL MARKET" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock).
4.8 Failure to Deliver Common Stock or Replacement Note. The Company
shall fail (i) to timely deliver Common Stock to the Purchaser pursuant to and
in the form required by this Note, and Section 9 of the Purchase Agreement, if
such failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Purchaser within seven
(7) business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).
1.1 Default Under Related Agreements or Other Agreements. The
occurrence and continuance of any Event of Default (as defined
in the Purchase Agreement or any Related Agreement) or any
event of default (or similar term) under any other
indebtedness in excess of $100,000 that causes acceleration of
such indebtedness.
1.2 Change in Control. There shall be a change in control in the
record or beneficial ownership of an aggregate of more than
forty percent (40%) of the outstanding Common Stock, in one
or more transactions, compared to the ownership of outstanding
shares of Common Stock on the date hereof, without the prior
written consent of Holder, which consent shall not be
unreasonably withheld (other than the sale of the Borrower's
equity securities in a public offering or to venture capital
or other private equity investors so long as the Borrower
identifies and advises Holder prior to the closing of the
investment or to strategic investors so long as Borrower
identifies the strategic investor prior to the closing of the
investment or issuances to the Holder) unless in the event the
Company shall dissolve, liquidate or merge with any other
person or entity, the Company is the surviving entity or the
successor entity is solvent and expressly assumes all of the
duties and obligations of the Company and its Subsidiaries
under this Agreement and Related Agreements.
DEFAULT RELATED PROVISIONS
4.11 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional interest
on this Note in an amount equal to one and one half percent (1.50%) per month
and all outstanding obligations under this Note, including unpaid interest,
shall continue to accrue such additional interest from the date of such Event
of Default until the date such Event of Default is cured or waived.
4.12 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.
4.13 Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Purchaser hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party notified, (b) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address provided in the Purchase Agreement executed in
connection herewith, and to the Purchaser at the address provided in the
Purchase Agreement for such Purchaser, with a copy to Xxxx X. Xxxxxx, Esq., 000
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (212) 541-
4434, or at such other address as the Company or the Purchaser may designate by
ten days advance written notice to the other parties hereto. A Notice of
Conversion shall be deemed given when made to the Company pursuant to the
Purchase Agreement.
5.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.
5.4 Assignability. This Note shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of the Purchaser and its
successors and assigns, and may be transferred by the Purchaser only in
accordance with the requirements of the Purchase Agreement and all applicable
federal and state securities laws. This Note shall not be assigned by the
Company without the consent of the Purchaser.
5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought
only in the state courts of New York or in the federal courts located in the
state of New York. Both parties agree to submit to the jurisdiction of such
courts. The prevailing party shall be entitled to recover from the other party
its reasonable attorney's fees and costs. In the event that any provision of
this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or unenforceability of any other
provision of this Note. Nothing contained herein shall be deemed or operate to
preclude the Purchaser from bringing suit or taking other legal action against
the Company in any other jurisdiction to collect on the Company's obligations
to Purchaser, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court in favor of the Purchaser.
5.6 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Purchaser and thus refunded to the
Company.
5.7 Security Interest. The Purchaser of this Note has been granted a
security interest in certain assets of the Company more fully described in a
Master Security Agreement dated as of the date hereof.
0.1 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore,
stipulates that the rule of construction that ambiguities are
to be resolved against the drafting party shall not be
applied in the interpretation of this Note to favor any party
against the other.
0.2 Cost of Collection. If default is made in the payment of
this Note, the Company shall pay to Purchaser reasonable
costs of collection, including reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name effective as of this 18th day of October, 2004.
IT&E INTERNATIONAL GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chief Executive Officer
EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Purchaser in order to convert all or part of the Note
into Common Stock)
[Name and Address of Purchaser]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by IT&E
INTERNATIONAL GROUP, INC. dated October __, 2004 by delivery of Shares of
Common Stock of IT&E INTERNATIONAL GROUP, INC. on and subject to the conditions
set forth in Article III of such Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:______________________________
