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EXHIBIT 4.6
NOTE 98-A__
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND IS A
"RESTRICTED SECURITY" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THIS
NOTE MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT
CERTAIN SUBSCRIPTION AGREEMENT THEREFOR BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER HEREOF.
(ALL AMOUNTS IN U.S. DOLLARS)
XXXXXX COMMUNICATIONS, INC.
12% CONVERTIBLE PROMISSORY NOTE WITH LIMITED GUARANTY
SERIES 98A
Due May 15, 1999
Note Date: _________________ US$_____________. 00
San Diego, California
FOR VALUE RECEIVED, Xxxxxx Communications, Inc., the undersigned
Delaware corporation (together with all successors, the "Company"), xxxxxx
promises to pay to the order of
Payee: _______________________________
or his, her or its successors or assigns
(collectively, "Noteholder") at
Address:
or at such other address or addresses as Noteholder may subsequently designate
in writing to the Company, the principal sum of ________________ and NO/100
Dollars ($______________.00), due and payable in one installment on May 15, 1999
("Maturity Date"), plus simple interest thereon at the rate of twelve percent
(12.00%) per annum, in lawful monies of the United States of America. If the
Maturity Date should fall on a weekend or national holiday, payment shall be due
on the following business day. This Note is one of a duly authorized issue of
Notes of the Company designated as its 12% Convertible Promissory Notes with
Limited Guaranty (herein called the "Notes"), limited in aggregate principal
amount to $1,000,000.
1. Any payment shall be deemed timely made if received by Noteholder
within ten (10) calendar days of the due date. Payments received shall be
imputed first to late or penalty charges, if any, then due, next to interest
payments then due, and next to the remaining unpaid principal balance.
An "Event of Default" occurs if (a) the Company does not make the
payment of interest or principal of this Note when the same becomes due and
payable and such default shall continue for a period of ten (10) calendar days
(a "Payment Default"), (b) the Company fails to comply with any of its other
agreements, representations or warranties in this Note or in the Subscription
Agreement and such failure continues for the period and after the notice
specified below,
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(c) it is subsequently determined that any representation or warranty of the
Company contained in the Subscription Agreement is not true and correct in all
material respects as of the date such representation and warranties were made,
(d) pursuant to or within the meaning of any Bankruptcy Law (as hereinafter
defined), the Company: (i) commences a voluntary case; (ii) consents to the
entry of an order for relief against it in an involuntary case; (iii) consents
to the appointment of a Custodian (as hereinafter defined) of it or for all or
substantially all of its property or (iv) makes a general assignment for the
benefit of its creditors or (v) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that: (A) is for relief against the
Company in an involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the liquidation of the
Company, and any order or decree remains unstayed and in effect for a period of
sixty (60) days. As used herein, the term "Bankruptcy Law" means Title 11 of the
United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A default other than a Payment Default under section (a) above is not an
Event of Default until the holders of at least 25% in aggregate principal amount
of the Notes then outstanding notify the Company of such default and the Company
does not cure it within thirty (30) days after receipt of such notice, which
must specify the default, demand that it be remedied and state that it is a
"Notice of Default." If an Event of Default occurs and is continuing, the
Noteholder hereof by notice to the Company, may declare the principal of and
accrued interest on this Note to be due and payable immediately; provided,
however, that the holders of at least 51% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company, may rescind and annul
such declaration and its consequences.
Upon an uncured Event of Default, the Company shall issue to the
Noteholder the number of shares which would have been issued in accordance with
the conversion provisions in Section 4. Additionally, the Noteholder shall have
the additional remedies of recovery provided in the Guarantee and Pledge
Agreement between the Company, Xxxxxx X. Xxxxxx (Limited Guarantor) and each
Noteholder. Should the Noteholder be satisfied pursuant to the terms of the
Guarantee and Pledge Agreement then the Company shall have no further
obligation. However should there be a deficiency, as defined in the Guarantee
and Pledge Agreement, the Company shall remain obligated for the deficiency and
any interest and penalties thereon and the Noteholder shall have such remedies
prescribed herein and by law.
2. The Company may not prepay any of the Notes at any time without the
prior written agreement of the Noteholders.
3. "Senior Indebtedness" means the principal of and premium, if any, and
interest on indebtedness of the Company or any subsidiary, whether outstanding
on the date of issuance of this Note or thereafter created, incurred or assumed
for money borrowed from (a) banks, insurance companies, financial institutions
or other persons which regularly engage in the business of lending money, unless
the instrument creating such indebtedness shall specifically designate such
indebtedness as not being senior in right of payment to the Notes, (b) the
$500,000 of Secured Notes currently outstanding, or (c) such other persons as to
which indebtedness the Board of Directors of the Company shall designate as
senior in right of payment to the Notes.
The Company agrees, and each Noteholder, by acceptance hereof likewise
agrees, expressly for the benefit of the present and future holders of Senior
Indebtedness, that, except as otherwise provided herein, upon (i) an event of
default under any Senior Indebtedness, or (ii) any dissolution, winding up or
liquidation of the Company, whether or not in bankruptcy, insolvency or
receivership proceeding, the Company shall not pay, and the Noteholder shall not
be entitled to receive, any amount in respect of the principal and interest of
this Note unless and until the Senior Indebtedness shall have been paid or
otherwise discharged. Upon (A) an event of default under any Senior
Indebtedness, or (B) any dissolution, winding up or liquidation of the Company,
any payment or distribution of assets of the Company, which the Noteholder would
be entitled to receive but for the provisions hereof, shall be paid by the
Custodian directly to the holders of Senior Indebtedness ratably according to
the aggregate amounts remaining unpaid on Senior Indebtedness after giving
effect to any concurrent payment or distribution to the holders of any Senior
Indebtedness. Subject to the payment in full of the Senior Indebtedness and
until this Note is paid in full, the Noteholder shall be subrogated to the
rights of the holders of the Senior Indebtedness (to the extent of payments or
distributions previously made to the holders of Senior Indebtedness pursuant
hereto) to receive payments or distributions of assets of the Company applicable
to the Senior Indebtedness.
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In the event that any Event of Default shall occur and as a result this
Note is declared due and payable, and such declaration shall not have been
rescinded or annulled, the Company shall not make any payment on account of the
principal of or interest on this Note unless at least thirty (30) days shall
have elapsed after said declaration and unless all principal of and interest on
Senior Indebtedness due at the time of such payment (whether by acceleration of
the maturity thereof or otherwise) shall first be paid in full.
Nothing contained in this Note is intended to impair, as between the
Company, its creditors (other than the holders of Senior Indebtedness) and the
Noteholder of this Note, the unconditional and absolute obligation of the
Company to pay the principal of and interest on this Note or affect the relative
rights of the holder of this Note and the other creditors of the Company, other
than the holders of Senior Indebtedness. Nothing in this Note shall prevent the
holder of this Note from exercising all remedies otherwise permitted by
applicable law upon default under this Note, subject to the rights, if any, of
the holders of Senior Indebtedness in respect to cash, property or securities of
the Company received upon the exercise of any such remedy.
Nothing in this Section 3 shall in any way impair or affect the Noteholder's
rights under the Guarantee and Pledge Agreement.
4. Conversion, Mandatory Conversion and Registration
(a) The outstanding principal amount of this Note (or increments thereof
of at least $25,000 or the balance if less) and any capitalized interest
may, at any time and from time to time, be converted at the option of
the Noteholder into fully paid, nonassessable shares of common stock
("Common Stock") of the Company, $.001 par value per share (the
"Conversion Shares"), at the Conversion Price per share as hereinafter
defined, subject to restrictions and limitations set forth herein. The
Conversion Price shall be $0.0875 per share with one adjustment on each
of any reverse stock split or similar adjustment to the lesser of (i)
$0.0875 (as adjusted as defined below in 4(c)) per share, or (ii) 80% of
the average closing bid price for ten days after each and any reverse
stock split or similar common adjustment (including any and each
distribution in shares, subdivision, split-up, combination,
reclassification or other change in the Common Stock).
(b) Conversion shall be effected by Noteholder's writing which
unequivocally expresses Noteholder's intent to effect the conversion and
states the amount of principal being converted and tender of such
writing (in the form of Exhibit A or other similar form) and this
original Note to the Company. Conversion shall be deemed to occur on the
date such writing is presented to Company by fax or other means as long
as the original Note is received promptly thereafter. Upon such
conversion duly made, Company shall execute a new Note of like tenor for
the balance of the principal amount of this Note not converted to common
stock, and deliver such new Note and Common Stock to Noteholder and any
obligation to repay (or guarantee repayment) of the converted amount
shall cease. The Company shall bear all expenses and charges of issuing
and delivering the Conversion Shares. Not less than $25,000 of principal
and interest owed under this Note may be converted at any one time;
provided, that if the aggregate of principal and interest owed is less
than that amount, then all amounts owed under the Note must be converted
at the same time.
(c) The conversion rate set forth in paragraph 4(a) will be subject to
adjustment if the Company is reorganized, merged, consolidated or party
to a plan of exchange with another corporation pursuant to which
shareholders of the Company receive any shares of stock or other
securities, or in the event of any sale or other transfer of all or
substantially all of the Company's assets, or in case of any
reclassification of Common Stock. Noteholder shall be entitled, after
the occurrence of any such event, to receive on conversion thereof the
kind and amount of shares of stock or other securities, cash or other
property receivable upon such event by a holder of the number of shares
of common stock into which the principal balance of this Note at such
time might have been converted immediately prior to occurrence of the
event. In addition, the conversion rate set forth in paragraph 4(a) of
this Note will be appropriately adjusted if the Common Stock is split or
combined.
(d) Upon conversion of this Note, the Company shall use its best efforts
to issue and deliver to Noteholder a certificate or certificates for the
number of Conversion Shares to which Noteholder shall be entitled within
ten (10) business days after Noteholder has fulfilled all conditions
required for conversion as set forth in this Note.
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The Company understands that a delay in the issuance of Conversion
Shares could result in economic loss to Noteholder. As compensation to
Noteholder for such loss, and not as a penalty, Company agrees to pay to
Noteholder for late issuance of Conversion Shares in the amount of one
percent (1.0%) of the requested conversion amount per week, beginning on
the twelfth (12th) business day from receipt by the Company of a duly
executed notice of conversion of the Note, provided that the original
Note to be converted has been delivered to the Company within such time
period, all in accordance with this Note agreement and the requirements
of the Company's transfer agent. Said liquidated damages shall accrue
each week through the date the Conversion Shares are issued to the
Noteholder, and shall be paid to the Noteholder upon the earlier to
occur of (i) issuance of said Conversion Shares to Noteholder, or (ii)
each monthly anniversary of the receipt by Company of such Noteholder's
notice of conversion. Nothing herein shall waive the Company's
obligations to deliver Conversion Shares or limit Noteholder's right to
pursue actual damages for the Company's unexcused failure to issue and
deliver Conversion Shares to Noteholder in accordance with the terms of
this Note agreement. The damage provisions of this paragraph shall not
apply to any delay caused by the Noteholder, his agents, successors, or
assigns or resulting from circumstances reasonably beyond the Company's
control or if in the Company's judgment the conversion would be contrary
to law or violate its corporate charter.
(e) The Company is entitled, at its option, at any time when the closing
bid price of the Common Stock has equaled or exceeded 200% of the
Conversion Price per share for ten (10) consecutive trading days during
which market sales occurred, upon ten (10) days' prior written notice
("Notice of Mandatory Conversion") to the holders of this Note, to
require the holder of this Note to convert all of the principal
outstanding and all interest accrued thereon through the date of the
Notice of Mandatory Conversion into fully paid and nonassessable shares
of Common Stock at the Conversion Price then in effect; provided, that
the Conversion Shares issuable are registered under the Securities Act
of 1933, as amended. The Company shall notify the Noteholder of
Company's intent to force conversion by giving written notice to the
Noteholder by facsimile or other electronic means, if possible, with
original notice to follow by two (2) day courier. Conversion pursuant to
this Section 4(d) shall be effective with respect to each Noteholder on
the fifth (5th) day (the "Mandatory Conversion Effective Date")
following the confirmed receipt by the Noteholder or any other person at
the Noteholder's designated address of the original notice referred to
in the preceding sentence.
Upon the effective date of forced conversion, this Note shall be
deemed void and no longer shall constitute an obligation of Company or
evidence of an obligation, irrespective of when surrendered to Company.
This provision requires the Company to convert all principal and
interest owing under this Note outstanding at the time of forced
conversion. The Noteholder shall in such event be required to surrender
the original of this Note as promptly as possible to the Company, which
shall mark the Note "canceled" upon receipt and retain permanent custody
of it. Upon the Company's receipt of this Note, the Company shall
deliver to the Noteholder the Conversion Shares called for by this
provision. If the Conversion Shares are not registered then the shares
shall contain the appropriate restrictive legend.
(f) The Company shall by August 31, 1998 ("Filing Date") prepare and
cause a registration statement on Form S-3, Form SB-2 or other
appropriate form to be filed with the Securities and Exchange Commission
for the purpose of registering the Conversion Shares under the Act for
issuance to Noteholders upon conversion of this Note including to the
extent appropriate the resale of such securities by the holders thereof.
The Company shall use its best efforts to update such registration
statement to remain effective for a period of nine months after it
becomes effective. Noteholder shall, in connection with such
registration, make such representations and warranties to the Company
and furnish such information as the Company shall reasonably request.
No demand or request for such registration by Noteholder shall be
necessary, and such registration shall be automatic. The Company shall
use its best efforts to cause such registration to become effective as
soon as practicable. All expenses of registering the Conversion Shares
shall be borne by the Company. The Company shall furnish to the
Noteholder and all other Noteholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request.
The Company shall register or qualify the Conversion Shares under the
securities or "blue sky" laws of
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such jurisdictions as the Noteholders reasonably request. The Company
shall not be required to register the Notes under the Act or otherwise
for resale, nor to register under the Act or otherwise for resale any
Conversion Shares obtained upon conversion of a Note prior to
effectiveness of such registration statement.
If Noteholder fails to convert the Note and obtain the Conversion
Shares after the effective date of such registration statement and
during the period the registration statement remains current, the
Company shall have no obligation to amend such registration statement or
file any further registration statement concerning such shares.
The Conversion Shares shall, upon due conversion of this Note, be
issued without restrictive legend and without entry of any stop transfer
notation in the Company's records, provided that at the time of issuance
the registration statement is effective and current and is not subject
of a stop order, and further provided that the Conversion Shares have
been duly registered or qualified under applicable state blue-sky laws.
In the event that such registration statement is not filed by August
31, 1998 or declared effective within 90 days of the Filing Date ("Due
Date"), then the principal payable under this Note shall increase an
additional one percent (1%) from such date for the first thirty (30)
days following the Due Date and three percent (3%) each thirty (30) day
period thereafter until effectiveness of the registration statement or
until May 15, 1999.
Each Noteholder of Conversion Shares to be sold pursuant to any
Registration Statement (each, a "Distributing Holder") shall severally,
and not jointly, indemnify and hold harmless the Company, its officers
and directors, each underwriter and each person, if any, who controls
the Company and such underwriter, against any loss, claim, damage,
expense or liability, joint or several, as incurred, to which any of
them may become subject under the Securities Act or any other statute or
at common law, in so far as such loss, claim, damage, expense or
liability (or actions in respect thereof) arises out of or is based upon
any untrue statement or alleged untrue statement of any material fact
contained in any such Registration Statement, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement
thereto, 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 light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company by such Distributing Holder
specifically for use therein. Such Distributing Holder shall reimburse
the Company, such underwriter and each such officer, director or
controlling person for any legal or other expenses reasonably incurred
by any of them in connection with investigating or defending any such
liability, as incurred. Notwithstanding the foregoing, such indemnity
with respect to such preliminary prospectus or such final prospectus
shall not inure to the benefit of the Company, its officers or
directors, or such underwriter (or such controlling person of the
Company or the underwriter) if the person asserting any such loss,
claim, damage, expense or liability purchased the securities that are
the subject thereof and did not receive a copy of the final prospectus
(or the final prospectus as then amended, revised or supplemented) at or
prior to the time such furnishing is required by the Securities Act in
any case where any such untrue statement or omission of a material fact
contained in the preliminary prospectus was corrected in the final
prospectus (or, if contained in the final prospectus, was subsequently
corrected by amendment, revision or supplement).
The Company shall indemnify and hold harmless each Distributing Holder
against any loss, claim, damage, expense or liability, joint or several,
as incurred, to which any of them may become subject under the
Securities Act or any other statute or at common law, in so far as such
loss, claim, damage, expense or liability (or actions in respect
thereof) arises out of or is based upon any untrue statement or alleged
untrue statement of any material fact contained in any such Registration
Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, 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 light of the
circumstances under which they were made, not misleading. The Company
shall reimburse each Distributing Holder, such underwriter and each such
officer, director or controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or
defending any such liability, as incurred. Notwithstanding the
foregoing, such indemnity with respect to such
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preliminary prospectus or such final prospectus shall not inure to the
benefit of the Company, its officers or directors, or such underwriter
(or such controlling person of the Company or the underwriter) if the
person asserting any such loss, claim, damage, expense or liability
purchased the securities that are the subject thereof and did not
receive a copy of the final prospectus (or the final prospectus as then
amended, revised or supplemented) at or prior to the time such
furnishing is required by the Securities Act in any case where any such
untrue statement or omission of a material fact contained in the
preliminary prospectus was corrected in the final prospectus (or, if
contained in the final prospectus, was subsequently corrected by
amendment, revision or supplement).
5. If this Note becomes worn, defaced or mutilated but is still
substantially intact and recognizable, the Company or its agent may issue a new
Note in lieu hereof upon its surrender. Where the Noteholder claims that the
Note has been lost, destroyed or wrongfully taken, the Company shall issue a new
Note of like tenor in place of the original Note if the Noteholder so requests
by written notice to the Company together with an affidavit of the Noteholder
setting forth the facts concerning such loss, destruction or wrongful taking and
such other information in such form with such proof or verification as the
Company may request. The Company in addition may require, at its sole
discretion, indemnification and/or an indemnity bond in such amount and issued
by such surety as the Company deems satisfactory.
6. If the indebtedness represented by this Note or any part thereof is
collected in bankruptcy, receivership or other judicial proceedings or if this
Note is placed in the hands of attorneys for collection after default, the
Company agrees to pay, in addition to the principal and interest payable
hereunder, reasonable attorneys' fees and costs incurred by the Noteholder.
7. Any notice, demand, consent or other communication hereunder shall be
in writing addressed to the Company at its principal office or, in the case of
Holder, at Xxxxxx's address appearing above, or to such other address as such
party shall have theretofore furnished by like notice, and either served
personally, sent by express, registered or certified first class mail, postage
prepaid, sent by facsimile transmission, or delivered by reputable commercial
courier. Such notice shall be deemed given (a) when so personally delivered, or
(b) if mailed as aforesaid, five (5) days after the same shall have been posted,
or (c) if sent by facsimile transmission, as soon as the sender receives written
or telephonic confirmation that the message has been received and such facsimile
is followed the same day by mailing by prepaid first class mail, or (d) if
delivered by commercial courier, upon receipt.
8. The Company hereby waives present, demand for performance, notice of
non-performance, protest, notice of protest and notice of dishonor. No delay on
the part of Noteholder in exercising any right hereunder shall operate as a
waiver of such right or any other right.
9. This Note shall be governed by and construed in accordance with the
laws of the State of California applicable to contracts between residents of
such state entered into and to be performed entirely within such state.
10. Each provision of this Note shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Note is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
IN WITNESS WHEREOF, the undersigned Company has executed this Note and has
affixed hereto its corporate seal.
XXXXXX COMMUNICATIONS, INC.
By /s/ XXXXXX XXXXXX
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AUTHORIZED OFFICER
