THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR UNDER APPLICABLE
STATE SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES 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 UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ICOA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, ICOA, INC., a Nevada corporation (hereinafter
called "Borrower"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Onshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South
Church Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the "Holder") or
order, without demand, the sum of Four Hundred Thousand Dollars ($400,000.00),
with simple interest accruing at the annual rate of 9%, on May 14, 2003 (the
"Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of fifteen percent (15%) per annum shall apply to the
amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in
Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to convert, interest
payable on this Note shall accrue at the annual rate of nine percent (9%) and be
payable in arrears commencing September 30, 2001 and quarterly thereafter, and
on the Maturity Date, accelerated or otherwise, when the principal and remaining
accrued but unpaid interest shall be due and payable, or sooner as described
below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
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2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the issuance of
this Note and then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note, and/or at the Holder's
election, the interest accrued on the Note, (the date of giving of such notice
of conversion being a "Conversion Date") into fully paid and nonassessable
shares of common stock of Borrower as such stock exists on the date of issuance
of this Note, or any shares of capital stock of Borrower into which such stock
shall hereafter be changed or reclassified (the "Common Stock") at the
conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"),
determined as provided herein. Upon delivery to the Company of a Notice of
Conversion as described in Section 9 of the subscription agreement entered into
between the Company and Holder relating to this Note (the "Subscription
Agreement") of the Holder's written request for conversion, Borrower shall issue
and deliver to the Holder within five business days from the Conversion Date
that number of shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. At the election of the Holder, the Company will
deliver accrued but unpaid interest on the Note through the Conversion Date
directly to the Holder on or before the Delivery Date (as defined in the
Subscription Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal (and interest, at the election of the Holder) of the Note to be
converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be the lower of (i) eighty (80%) of the average
of the three lowest closing bid prices for the Common Stock on 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, the
"Principal Market"), or if not then trading on a Principal Market, such other
principal market or exchange where the Common Stock is listed or traded for the
thirty (30) trading days prior to but not including the Closing Date (as defined
in the Subscription Agreement) in connection with which this Note is issued
("Maximum Base Price"); or (ii) seventy percent (70%) percent of the average of
the three lowest closing bid prices for the Common Stock on the Principal
Market, or on any securities exchange or other securities market on which the
Common Stock is then being listed or traded, for the sixty (60) trading days
prior to but not including the Conversion Date.
(c) The Maximum Base Price described in Section 2.1(b)(i) above and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to adjustment
from time to time upon the happening of certain events while this conversion
right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets, etc. If the Borrower at any time shall
consolidate with or merge into or sell or convey all or substantially all its
assets to any other corporation, this Note, as to the unpaid principal portion
thereof and accrued interest thereon, shall thereafter be deemed to evidence
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the right to purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account of such
consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower 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 portion thereof 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.
C. 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 Maximum Base Price 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.
D. Share Issuance. Subject to the provisions of this Section, if
the Borrower at any time shall issue any shares of Common Stock prior to the
conversion of the entire principal amount of the Note (otherwise than as: (i)
provided in Sections 2.1(c)A, 2.1(c)B or 2.1(c)C or this subparagraph D; (ii)
pursuant to options, warrants, or other obligations to issue shares, outstanding
on the date hereof as described in the Reports and Other Written Information, as
such terms are defined in the Subscription Agreement (which agreement is
incorporated herein by this reference); or (iii) Excepted Issuances, as defined
in Section 12 of the Subscription Agreement; [(i), (ii) and (iii) above, are
hereinafter referred to as the "Existing Option Obligations"] for a
consideration less than the Maximum Base Price that would be in effect at the
time of such issue, then, and thereafter successively upon each such issue, the
Maximum Base Price shall be reduced as follows: (i) the number of shares of
Common Stock outstanding immediately prior to such issue shall be multiplied by
the Maximum Base Price in effect at the time of such issue and the product shall
be added to the aggregate consideration, if any, received by the Borrower upon
such issue of additional shares of Common Stock; and (ii) the sum so obtained
shall be divided by the number of shares of Common Stock outstanding immediately
after such issue. The resulting quotient shall be the adjusted Maximum Base
Price. Except for the Existing Option Obligations, for purposes of this
adjustment, the issuance of any security of the Borrower carrying the right to
convert such security into shares of Common Stock or of any
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warrant, right or option to purchase Common Stock shall result in an adjustment
to the Maximum Base Price upon the issuance of shares of Common Stock upon
exercise of such conversion or purchase rights.
(d) During the period the conversion right exists, Borrower 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. Borrower represents that upon issuance, such shares will be duly and
validly issued, fully paid and non-assessable. Xxxxxxxx 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.
2.2 Method of Conversion. This Note may be converted by the
Holder in whole or in part as described in Section 2.1(a) hereof and the
Subscription Agreement. Upon partial conversion of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of
the Holder, be issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or paid.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default ("Event
of Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, all without demand, presentment
or notice, or grace period, all of which hereby are expressly waived, except as
set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails to
pay any installment of principal or interest hereon when due and such failure
continues for a period of ten (10) days after the due date. The ten (10) day
period described in this Section 3.1 is the same ten (10) day period described
in Section 1.1 hereof.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of seven (7) days after
written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement entered into by the Holder and Borrower in connection with this Note,
or in any agreement, statement or certificate given in writing pursuant hereto
or in connection therewith shall be false or misleading in any material respect.
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3.4 Receiver or Trustee. The Borrower 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.
3.5 Judgments. Any money judgment, writ or similar final process
shall be entered or filed against Borrower or any of its property or other
assets for more than $50,000, and shall remain unvacated, unbonded or unstayed
for a period of forty-five (45) days.
3.6 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 or against the
Borrower.
3.7 Delisting. Delisting of the Common Stock from the Principal
Market or such other principal exchange on which the Common Stock is listed for
trading; Borrower's failure to comply with the conditions for listing; or
notification from the Principal Market that the Borrower is not in compliance
with the conditions for such continued listing.
3.8 Concession. A concession by the Borrower, after applicable
notice and cure periods, under any one or more obligations in an aggregate
monetary amount in excess of $50,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market
trading suspension.
3.10 Failure to Deliver Common Stock or Replacement Note.
Xxxxxxxx's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 9 of the Subscription Agreement,
or if required a replacement Note.
3.11 Registration Default. The occurrence of a Non-Registration
Event as described in Section 10.4 of the Subscription Agreement, except that
with respect to a Non-Registration Event in connection with the required
declared effectiveness of the Registration Statement (as defined in the
Subscription Agreement) on or before the Effective Date (as defined in the
Subscription Agreement) such Non-Registration Event must be continuing on or
occur after a date which is one-hundred and twenty (120) days after the Closing
Date (as defined in the Subscription Agreement).
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the
part of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any
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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.
4.2 Notices. Any notice herein required or permitted to be given
shall be in writing and may be personally served or sent by fax transmission
(with copy sent by regular, certified or registered mail or by overnight
courier). For the purposes hereof, the address and fax number of the Holder is
as set forth on the first page hereof. The address and fax number of the
Borrower shall be ICOA, Inc., 000 Xxxxxxx Xxxx, Xxxxxxx, XX 00000, telecopier
number: (000) 000-0000. Both Xxxxxx and Borrower may change the address and fax
number for service by service of notice to the other as herein provided. Notice
of Conversion shall be deemed given when made to the Company pursuant to the
Subscription Agreement.
4.3 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.
4.4 Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder.
4.5 Cost of Collection. If default is made in the payment of this
Note, Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of New York. 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.
4.7 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 Borrower to the Holder and thus refunded to the
Borrower.
4.8 Prepayment. This Note may not be paid prior to the Maturity
Date without the consent of the Holder.
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4.9 Security Interest. The holder of this Note has been granted a
security interest in common stock of the Company more fully described in a
Security Agreement.
IN WITNESS WHEREOF, Xxxxxxxx has caused this Note to be signed in its name
by its Chief Executive Officer on this 14th day of May, 2001.
ICOA, INC.
By: /s/ XXXXXX XXXXXXXXXXXXXX
--------------------------------------
Xxxxxx Xxxxxxxxxxxxxx
WITNESS:
/s/ WITNESS
-------------------------------
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NOTICE OF CONVERSION
--------------------
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by ICOA, INC. on May 14, 2001
into Shares of Common Stock of ICOA, INC. (the "Company") according to the
conditions set forth in such Note, as of the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
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