EXHIBIT 4.10
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, OFFERED
FOR SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS THEY ARE SO REGISTERED OR
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
AXXESS, INC.
12% SECURED CONVERTIBLE NOTE DUE DECEMBER 14, 1999
Principal Amount $500,000
AXXESS, INC., a Utah corporation (the "Company"), for value received,
hereby promises to pay to Xxxxx Xxxxxxxx (the "Lender"), or registered assigns,
on December 14, 1999, the principal amount of Five Hundred Thousand Dollars
($500,000) (or so much thereof as shall not have been prepaid or surrendered for
conversion) in such coin or currency of the United States of America as of the
time of payment shall be legal tender for the payment of public and private
debts, at the offices of the Lender 0000 Xxxxx Xxxxxxxxxx Xxxxx, Xxxxxx Xxxxxxx,
XX 00000, together with interest (computed on the basis of 360-day year of
twelve 30-day months) on the unpaid portion of the principal amount hereof at
the annual rate of twelve per cent (12%) from the date hereof until the date
such unpaid portion of such principal amount shall have become due and payable.
Section 1. THE NOTES.
Section 1.01. Registration, Transfer and Exchange of Convertible Notes. The
Company shall keep at its principal office a register in which the Company will
provide for registration, transfer and exchange of Convertible Notes. Subject to
compliance with applicable securities laws, the Holder (as defined below) of any
Convertible Note may, at its option and either in person or by duly authorized
attorney, surrender the same at said office for registration of transfer or
exchange, accompanied, if surrendered for transfer, by a written instrument of
transfer duly executed by said Xxxxxx or attorney. If any Holder shall so
request transfer or exchange of a Convertible Note held by it, the Company
shall, within a reasonable time thereafter, without expense to such Holder
(other than transfer taxes, if any) deliver to or upon its order one or more
Convertible Notes in the same unpaid aggregate principal amount as the
Convertible Note so surrendered, each dated the date to which interest has been
paid on the Convertible Note so surrendered, each dated the date to which
interest has been paid on the Convertible Note so surrendered, in the principal
amount of $5,000 or any multiple thereof, and registered in such name or names,
or payable to such Person or Persons, or order, as shall be specified by the
Holder making such request. The Company may deem and treat the Holder of any
Convertible Note as the absolute owner of such Convertible Note for the purpose
of receiving payment of or on account of the principal of (and premium, if any)
and interest on, such Convertible Note and for the purposes of any notices,
waivers or consent thereunder, and payment of any Convertible Note shall be made
only to or upon the order in writing of such Holder.
Section 1.02. Loss, Theft, Destruction of Convertible Notes. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Convertible Note and, in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the Company,
or in the case of any such mutilation, upon surrender and cancellation of this
Convertible Note, the Company will make and deliver, in lieu of such lost,
stolen, destroyed or mutilated Convertible Note, a new Convertible Note of like
tenor and unpaid principal amount and dated as of the date from which unpaid
interest has then accrued on the Convertible Note so lost, stolen, destroyed or
mutilated.
Section 2. DEFINITIONS
Section 2.01. Terms Defined. The terms defined in this Section 2.01 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Convertible Note shall have the respective meanings
specified in this Section 2.01.
Common Stock: The term "Common Stock" means shares of the Company's Common
Stock, par value $.001 per share.
Collateral: The term "Collateral" means all rights now or hereafter owned
by the Company in any tradename, trademark, design, invention, copyright, patent
and any license or application for any of the foregoing.
Company: The term "Company" means AXXESS, INC., a Utah corporation, and any
successor corporation to the Company (including the corporation surviving any
subsequent merger).
Current Conversion Price: The term "Current Conversion Price" means the
Conversion Price as most recently adjusted pursuant to Section 6.06.
Default: The term "Default" means an event which with notice or upon the
lapse of time or both would become an Event of Default.
Event of Default: The term "Event of Default" means any event specified in
Section 5.01, continued for the period of time, if any, and after the giving of
notice, if any, therein designated.
Holder: The term "Holder" means the Person in whose name such Convertible
Note is registered in the register maintained by the Company pursuant to Section
1.01.
Maturity: The term "Maturity" when used with respect to any Convertible
Note means the date on which the principal (and premium, if any) of such
Convertible Note becomes due and payable as herein provided, whether at (a)
December 14, 1999, (b) declaration of acceleration or (c) otherwise.
Section 3. CERTAIN COVENANTS.
Section 3.01. Payment of Convertible Notes. The Company will duly and
punctually pay or cause to be paid the principal of (and premium, if any) and
the interest on each of the Convertible Notes at the time and place and in the
manner provided herein.
Section 3.02. General Covenants. The Company will:
(a) promptly pay and discharge or cause to be paid and discharged all
lawful taxes, assessments, and governmental charges or levies imposed upon the
Company upon the income or profits of the Company or upon any property, real,
personal or mixed, belonging to the Company or upon any part thereof, before the
same shall become in default, as well as all lawful claims for labor, material
and supplies which, if unpaid, might become a lien or charge upon such
properties or any part thereof; except that the Company shall not be required to
pay and discharge or to cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company as the case
may be, shall set aside on its books such reserves, if any, as shall be deemed
by it adequate with respect to any such tax, assessment, charge, levy or claim
so contested;
(b) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and franchises, and comply
with all laws applicable to the Company as its counsel may advise; except that
nothing in this subsection (b) shall prevent a liquidation or dissolution of, or
a sale, transfer or disposition of the property and assets of, or a merger or
consolidation of, the Company or any Affiliate not prohibited by the provisions
of Section 3.04; and
(c) at all times maintain, preserve, protect and keep, or cause to be
maintained, preserved, protected and kept, its property used or useful in the
conduct of the business of the Company in good repair, working order and
condition, and from time to time make, or cause to be made, all necessary and
proper repairs, renewals, replacements, betterments and improvements thereto, so
that
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the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 3.03. Notice of Defaults. In the event that any Event of Default
shall have occurred, the Company will promptly give written notice thereof to
each Holder of a Convertible Note.
Section 3.04. Mergers, etc. Subject to Section 3.02, the Company may not
consolidate with or merge or into, or transfer all or substantially all its
assets to, another corporation unless (a) the resulting, surviving or transferee
corporation assumes in writing all the obligations of the Company under the
Convertible Notes and (b) no Event of Default shall have occurred and be
continuing. Upon any consolidation or merger, or any transfer of all or
substantially all the assets of the Company in accordance with this Section
3.04, the successor corporation formed by such consolidation or with or into
which the Company is merged or to which such transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Convertible Note with the same effect as if such successor
corporation had been named as the Company herein.
Section 3.05. Notice of Mergers. the Company shall, within ten business
days after the effective date of each merger or consolidation of the Company,
notify each Holder of the Convertible Notes that such merger or consolidation
has occurred and shall specify such effective date.
Section 3.06. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of any stay or extension or any usury law or other law, which would
prohibit or forgive the Company from paying all or any portion of the principal
of (and premium, if any) or interest on the Convertible Notes or both as
contemplated therein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Convertible Note
and hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Holder hereof, but will suffer and permit the execution of
such power as though no such law had been enacted.
Section 4. OPTIONAL PREPAYMENTS.
Section 4.01. Optional Prepayments. The Company shall have the
privilege, at any time and from time to time prior to Maturity of prepaying the
outstanding Convertible Notes, either in whole or in part by payment of the
principal amount of each Convertible Note, or portion thereof to be prepaid, and
accrued interest thereon to the date of such prepayment, without premium or
penalty.
Section 4.02. Notice of Prepayments. The Company will give notice of any
prepayment of the Convertible Notes pursuant to Section 4.01 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment ("Prepayment Date") specifying (i) the Prepayment Date,
(ii) the principal amount of the holder's Convertible Notes to be prepaid on the
Prepayment Date and (iii) the accrued interest applicable to the prepayment.
Notice of prepayment having been so given, the aggregate principal amount of the
Convertible Notes specified in such notice, together with the premium, if any,
and accrued interest, thereon shall become due and payable on the Prepayment
Date.
Section 4.03. Allocation of Prepayments. All partial prepayments
pursuant to Section 4.01 shall be applied on all outstanding Convertible Notes
ratably in accordance with the unpaid principal amounts thereof.
Section 5. REMEDIES.
Section 5.01. Events of Default. An "Event of Default" occurs if one or
more of the following shall happen (for any reason whatsoever and whether such
happening shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(a) if default be made in the punctual payment of the principal
of (or premium, if any) on any of the Convertible Notes when and as the same
shall become due and payable, whether at the fixed maturity of said Convertible
Notes; or
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(b) if default be made in the payment of any installment of
interest on any of the Convertible Notes and such default shall continue for a
period of 3 days after notice; or
(c) if default be made in the due observance or performance of
any covenant, condition or agreement contained in Sections 3.02 to 3.06, both
inclusive, and such default shall have continued for a period of 30 days after
the Holders of a majority of the principal amount of the Convertible Notes then
outstanding shall have given notice to the Company (which notice shall specify
the default, demand that it be remedied and state that the notice is a "Notice
of Default"); or
(d) the Company pursuant to or within the meaning of any
Bankruptcy Law; (i) commences a voluntary case, (ii) consents to the entry of an
order for relief against it in an involuntary case, (iii) to the appointment of
a Custodian of it or for any substantial part of its property, (iv) makes a
general assignment for the benefit of its creditors; or
(e) a court of competent jurisdiction enters and order or decree
under any Bankruptcy Law that: (i) is for relief against the Company in an
involuntary case, (ii) appoints a Custodian of the Company or for any
substantial part of its property, (iii) orders the liquidation of the Company;
and the order or decree remains unstayed and in effect for 30 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
Section 5.02. Acceleration. If an Event of Default (other than an Event
of Default specified in Section 5.01(d) of (e)) occurs and is continuing then,
at the option of the Holder of this Convertible Note, exercised by written
notice to the Company, the principal (and premium, if any) of this Convertible
Note shall forthwith become due and payable, together with the interest accrued
hereon. If an Event of Default specified in Section 5.01(d) or (e) occurs at any
time, such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Holder of this
Convertible Note.
The provisions of this Section 5.02 are subject, however, to the
condition that if, at any time after any Convertible Note shall have so become
due and payable, the Company shall pay all arrears of interest on the
Convertible Notes and all payments on account of the principal (and premium, if
any) of the Convertible Notes which shall have become due otherwise than by
acceleration (with interest on such principal), and all Events of Default (other
than nonpayment of principal of and premium, if any, and accrued interest on
Convertible Notes due and payable by virtue or acceleration) shall be remedied
or waived pursuant to Section 8.04, then, and in every such case, subject to
Section 8.04(b), the Holder or Holders of at least 66 2/3% in aggregate
principal amount of all Convertible Notes at the time outstanding, by written
notice to the Company, may rescind and annul such acceleration and its
consequences; but no such action shall affect any subsequent Default or Event of
Default or impair any right consequent thereon.
Section 5.03. Other Remedies. Subject to the provisions of Section 5.02,
in case any one or more of the Events of Default specified in Section 5.01 shall
have occurred and be continuing, the Holder of this Convertible Note may proceed
to protect and enforce its rights by suit in equity, action at law or by other
appropriate proceedings or both, whether for the specific performance of any
covenant or agreement contained in this Convertible Note or in aid of the
exercise of any power granted in this Convertible Note, or may proceed to
enforce the payment of this Convertible Note or to enforce any other legal or
equitable right of the Holder of this Convertible Note.
Section 5.04. Notice by the Company of Acceleration or Other Action by
Convertible Noteholders or Holders of Other Indebtedness. If any Holder of a
Convertible Note shall give any notice to the Company with respect to any Event
of Default (or with respect to any event which with notice of the lapse of time,
or both, would be an Event of Default), or accelerate the maturity thereof or
take any other action in respect of an Event of Default or such event, or if the
holder of any bond, debenture, note or other similar evidence of indebtedness
(other than the Convertible Notes) of, or secured or guaranteed by, the Company,
shall give any notice to the Company in respect of any default thereunder or
under any agreement pursuant to which such bond, debenture, note or other
evidence or indebtedness is issued, the Company shall forthwith give written
notice to all Holders of Convertible Notes, specifying such action and the
nature and status of such Event of Default or event or other default.
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Section 5.05. Remedies Cumulative. No remedy herein conferred upon the
Holder of this Convertible Note is intended to be exclusive of any other remedy
and each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
Section 5.06. Enforcement. If there shall be any Default under this
Convertible Note and this Convertible Note shall be placed in the hands of an
attorney for collection, or shall be collected through any court, including any
bankruptcy court, the Company promises to pay to the order of the Holder hereof
such Xxxxxx's reasonable attorneys' fees and court costs incurred in collecting
or attempting to collect or securing or attempting to secure this Convertible
Note or enforcing the holder's rights with respect to any collateral securing
this Convertible Note, to the extent allowed by the laws of the State of Florida
or any state in which any collateral for this Note shall be situated.
Section 6. CONVERSION
Section 6.01. Right of Conversion; Conversion Price. Subject to and upon
compliance with the provisions of this Section 6, the Holder shall have the
right, at his option, at any time during usual business hours (including the
period between the date on which the Company gives notice of prepayment and the
Prepayment Date) to convert the principal and accrued interest of any
Convertible Note owned by such Holder into fully paid and nonassessable shares
of Common Stock at the rate of $0.50 of principal for each share of Common Stock
(the "Conversion Price") which price per share shall be payable by surrender of
such Convertible Note.
(a) The Company represents and warrants that as of the date
hereof, the authorized and outstanding capital stock of the Company is as
described on Schedule A hereto.
Section 6.02. Manner of Exercise.
(a) In order to exercise the conversion right, the Holder of
any Convertible Note to be converted shall surrender such Convertible Note at
the office of the Company, accompanied by written notice to the Company stating
(i) that the Holder elects to convert such Convertible Note or, if less than the
entire principal amount of a Convertible Note is to be converted, the portion
thereof (a multiple of $1,000) to be converted, and (ii) the name or names (with
addresses) in which the certificate or certificates for shares of Common Stock
issuable on such conversion shall be issued. Convertible Notes surrendered for
conversion shall be accompanied by proper assignment thereof to the Company or
in blank for transfer if the shares are to be issued in a name other than that
of the Holder.
(b) In the case of any Convertible Note which is converted in
part only, upon such conversion the Company shall execute and deliver to the
Holder thereof, at the expense of the Company, a new Convertible Note or
Convertible Notes of authorized denominations in principal amount equal to the
unconverted portion of such Convertible Note.
Section 6.03. Issuance of Shares of Common Stock on Conversion.
(a) As promptly as practicable after the receipt of such notice
and the surrender of such Convertible Note as aforesaid, the Company shall
issue, at its expense, and shall deliver to such Holder, or on his written
order, at the aforesaid office of the Company (i) a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
such Convertible Note (or specified portion thereof), and (ii) a certificate or
certificates for any fractional shares of Common Stock issuable upon conversion
of such Convertible Note (or specified portion thereof) or, at the Company's
option, cash in lieu of scrip for any fraction of a share to which such Holder
is entitled upon conversion as provided in Section 6.05.
(b) Such conversion shall be deemed to have been effected
immediately prior to the close of business on the date ("Conversion Date") on
which the Company shall have received both such notice and the surrendered
Convertible Note as aforesaid, and at such time the rights of the Holder of such
Convertible Note shall cease and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
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Section 6.04. No Adjustments for Interest or Dividends. No payment or
adjustment shall be made by or on behalf of the Company on account of any
interest accrued on any Convertible Notes surrendered for conversion or on
account of any dividends on the shares of Common Stock issued upon such
conversion which were declared for payment to holder of shares of Common Stock
of record as of a date prior to the Conversion Date. All payments of accrued
interest on any Convertible Note shall be made in cash or additional stock at
the Conversion Price, at Lender's option.
Section 6.05. Fractional Shares. The Company, at its option, may issue
fractional shares of Common Stock upon any conversion of Convertible Notes or,
in lieu of any fraction of a share of Common Stock to which any Holder would
otherwise be entitled upon conversion of any Convertible Notes (or specified
portions thereof), the Company may pay a cash adjustment for such fraction in an
amount equal to same fraction of the Conversion Price per share.
Section 6.06. Adjustment of Conversion Price. The Conversion Price
shall be adjusted as set forth in this section.
(a) In the event that the Company shall make any distribution of
its assets upon or with respect to its shares of Common Stock, as a liquidating
or partial liquidating dividend, or other than as a dividend payable out of
earnings or any surplus legally available for dividends under the laws of the
state of incorporation of the Company, each Holder of any Convertible Note then
outstanding shall, upon the exercise of his right to convert after the record
date for such distribution or, in the absence of a record date, after the date
of such distribution, receive, in addition to the shares subscribed for, the
amount of such assets (or, at the option of the Company, a sum equal to the
value thereof at the time of distribution as determined by the Board of
Directors in its sole discretion) which would have been distributed to such
Holder if he had exercised his right to convert immediately prior to the record
date for such distribution or, in the absence of a record date, immediately
prior to the date of such distribution.
(b) In case at any time the Company shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Current
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced and conversely, in case the outstanding shares of Common
Stock of the Company shall be combined into a smaller number of shares, the
Current Conversion Price in effect immediately prior to such combination shall
be proportionately increased.
(c) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale, transfer or lease of all or substantially all
of its assets to another corporation, shall be effected in such a way that
holders of shares of Common Stock shall be entitled to receive shares,
securities or assets with respect to or in exchange for shares of Common Stock,
then, as a condition of such reorganization, reclassification, consolidation,
merger or sale, the Company or such successor or purchasing corporation, as the
case may be, shall execute an amendment to the Convertible Notes providing that
the Holder of each Convertible Note then outstanding shall have the right
thereafter and until the expiration of the period of convertibility to convert
such Convertible Note into the kind and amount of shares, securities or assets
receivable upon such reorganization, reclassification, consolidation, merger or
sale by a holder of the number of shares of Common Stock into which such
Convertible Note might have been converted immediately prior to such
reorganization, reclassification, consolidation, merger or sale, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.
(d) In case the Company shall at any time after the date hereof
issue or sell any shares of Common Stock, including shares held in the Company's
treasury and shares of Common Stock issued upon the exercise of any options,
rights or warrants to subscribe for shares of Common Stock and shares of Common
Stock issued upon the direct or indirect conversion or exchange of securities
for shares of Common Stock, for a consideration per share less than the then
Current Conversion Price in effect immediately prior to the issuance or sale of
such shares or without consideration, then forthwith upon such issuance or sale,
the Conversion Price shall (until another such issuance or sale) be reduced to
the price (calculated to the nearest full cent), determined by dividing (i) an
amount equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the then existing
Conversion Price, and (B) the aggregate amount of the consideration, if any,
received by the Company upon such issuance or sale by, (ii) the total number of
shares of Common Stock outstanding immediately after such issuance or sale;
provided,
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that in no event shall the Conversion Price be adjusted pursuant to this
computation to an amount in excess of the Conversion Price in effect immediately
prior to such computation, except in the case of a combination of outstanding
shares of Common Stock, as provided by Section 6.06(b) hereof.
For purposes of any computation to be made in accordance with this
Section 6.06(d), the following provisions shall apply:
(i) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(ii) The number of shares of Common Stock at any one
time outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(e) In case the Company shall at any time after the date hereof
issue options, rights or warrants to subscribe for shares of Common Stock or
issue any securities convertible into or exchangeable for shares of Common
Stock, for a consideration per share less than the then Current Conversion Price
in effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, or without consideration, the
Conversion Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 6.06(d) hereof; provided, that:
(i) If any change shall occur in the price per share
provided for in any of such options, rights or warrants, or in the price per
share at which such securities are convertible or exchangeable, such options,
rights or warrants or conversion or exchange rights, as the case may be, shall
be deemed to have expired or terminated on the date when such price change
became effective in respect of shares not therefore issued pursuant to the
exercise or conversion or exchange thereof, and the Company shall be deemed to
have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number of shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange or such convertible or exchangeable securities.
(f) Upon such adjustment of the Conversion Price pursuant to the
provisions of this Section 6.06, the number of shares issuable upon conversion
of this Note shall be adjusted to the nearest full amount by multiplying a
number equal to the Conversion Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable upon exercise of
this Note immediately prior to such adjustment and dividing the product so
obtained by the adjusted Conversion Price.
Section 6.07. Covenant to Reserve Shares for Conversion.
The Company covenants that it will at all times reserve and keep
available out of its authorized shares of Common Stock, such number of shares of
Common Stock as shall then be deliverable upon the conversion of all outstanding
Convertible Notes. All shares of Common Stock which shall be deliverable shall
be duly and validly issued and fully paid and nonassessable.
Section 6.08. Notice of Change of Conversion Price. Whenever the
Conversion Price is adjusted, as herein provided, the Company shall promptly
send to each Holder a certificate of a firm of independent public accountants
(who may be the accountants regularly employed by the Company) selected by the
Board of Directors setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
certificate shall be conclusive evidence of the correctness of such adjustment.
Section 7. REGISTRATION RIGHTS.
Section 7.01. Piggy-Back. If the Company proposes to file, on its behalf
and/or on behalf of any of its securities holders, a Registration Statement
under the Securities Act of 1933, as
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amended (the "Securities Act") other than in connection with a dividend
reinvestment, employee stock purchase, option or similar plan or in connection
with a merger, consolidation or reorganization, the Company shall give written
notice to each Holder at least 30 days before the filing with the Securities and
Exchange Commission ("SEC") of such Registration Statement. Each Holder who
desires to include any of its shares of Common Stock into which the Convertible
Notes are convertible, whether or not already converted, (the "Registrable
Securities") in such Registration Statement shall give written notice to the
Company within 20 days after the date of mailing of such offer, and shall
deliver to the Company a letter from counsel selected by such Holder to the
effect that registration under the Securities Act is required. The Company shall
thereupon include in such filing the shares of Common Stock designated by such
Holder and, subject to its right to withdraw such filing, shall use its best
efforts to effect registration under the Securities Act of such shares of Common
Stock.
Section 7.02. Conditions. The right of the Holders to have shares
included in any Registration Statement in accordance with the provisions of this
Section 7 shall be subject to the following conditions:
(a) The Company shall have the right to require that the Holders
participating in such Registration Statement agree to refrain from offering or
selling (other than in a private sale) any shares of Common Stock that they own
which are not included in any such Registration Statement in accordance with
this Section 7 for any time period (not to exceed 180 days) specified in writing
by any managing underwriter of the offering to which such Registration Statement
relates;
(b) If any managing underwriter of the offering to which the
Registration Statement relates informs the Company in writing that the total
number of shares of Common Stock requested by the Holders to be included in the
Registration Statement is sufficiently large to affect the success of such
offering adversely, then the Company will include only the number of shares, if
any, in the Registration Statement that such managing underwriter shall advise
the Company will not so affect the offering, and reductions in the number of
shares of Common Stock owned by the Holders and other persons who have elected
to have shares of Common Stock included in such Registration Statement will be
made proportionate to their respective percentages of ownership of shares to be
included in the Registration Statement;
(c) The Company shall furnish Holders who have shares included
in a Registration Statement pursuant to this Section 7 with such number of
copies of the prospectus relating to the offering (the "Prospectus") (including
any preliminary prospectus or supplemental or amended prospectus) as such Holder
may reasonably request in order to facilitate the sale and distribution of its
shares; and
Section 7.03. Right to Terminate. Notwithstanding the foregoing, the
Company in its sole discretion may determine not to file the Registration
Statement or proceed with the offering as to which the notice specified herein
is given without any liability to Holders.
Section 7.04. Number of Shares. Each Holder shall have the right to
register shares of Common Stock under this Section 7 on an unlimited number of
occasions.
Section 7.05. "No Action" Letter; Opinion of Counsel. No Holder shall
have registration rights under this Section with respect to any sales proposed
by them of shares as to which sales (i) a "no action" letter is received from
the SEC or its staff confirming the availability of an exemption from the
requirements of the Securities Act or (ii) an unqualified opinion of counsel to
the Company is rendered to the effect that registration of such shares for such
sales is not required; provided that in both cases (i) and (ii) above, the
volume limitations of Rule 144(e) under the Securities Act shall not limit the
amount of shares of Common Stock that the Holders are entitled to offer and sell
without registration under the Securities Act.
Section 7.06. Recall of Prospectuses, etc. With respect to a
Registration Statement or amendment thereto filed pursuant to this Section, if,
at any time, the Company notifies the selling Holder that an amendment or
supplement to such Registration Statement or amendment or the prospectus
included therein is necessary or appropriate, the selling Holder will forthwith
cease selling and distributing shares thereunder and will forthwith redeliver to
the Company all copies of such Registration Statement and prospectuses then in
their possession or under their control.
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Section 7.07. Cooperation of Holders. The Company shall be entitled to
require that each selling Holder cooperate with the Company in connection with a
registration of shares of Common Stock pursuant to this Section and furnish such
information, representations, undertakings and agreements regarding such selling
Holder and the distribution as may be reasonably required by the Company or as
required by law in connection therewith.
Section 7.08. Expenses. The Company will bear all the expenses in
connection with any Registration Statement under this Section 7 (including the
fees and expenses of a single counsel to the Holders) other than transfer taxes
payable on the sale of such shares and fees and commissions of broker, dealers
and underwriters.
Section 7.09. Indemnification. In the event of the registration of any
securities under the Securities Act pursuant to this Section, the Company and
the Holders shall provide to each other customary indemnification to the extent
of any loss, claim, damage, liability or expense arising out of such
registration.
Section 7.10. Greater Rights. If, in connection with any offering of the
securities of the Company, the Company shall grant to the purchasers thereof any
greater rights with respect to registration than are provided hereunder, the
Lender, and, to the extent assigned by the Lender, each Holder, shall
automatically be entitled to such greater rights as though fully set forth
herein. In the event that the Company shall no consummate an offering within 90
days of the date hereof providing for the registration of the Registrable
Securities upon the demand of the holders thereof, the Holders of a majority of
the principal amount of the Convertible Notes then outstanding shall thereupon
have the right to demand one registration of their Registrable Securities at the
Company's expense.
Section 8. MISCELLANEOUS
Section 8.01. Governing Law. This Convertible Note shall be construed in
accordance with the laws of the State of Florida applicable to contracts entered
into and to be performed wholly within said State.
Section 8.02. Successors and Assigns. All the covenants, stipulations,
promises and agreements in the Convertible Notes contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
Section 8.03. Course of Dealing; No Waiver. No course of dealing between
the Company and the Holder hereof shall operate as a waiver of any right of any
Holder hereof and no delay on the part of the Holder in exercising any right
hereunder shall so operate.
Section 8.04. Waiver of Compliance.
(a) Any term, covenant, agreement or condition hereof may be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the Company
shall have obtained the agreement or consent in writing of the Holders of at
least 51% in aggregate principal amount of all outstanding Convertible Notes;
except that without the agreement or consent in writing of the Holders of all
outstanding Convertible Notes, no such amendment or waiver shall;
(i) change the amount or maturity of any principal of (or
premium, if any) on the Convertible Notes or change the rate or extend
the time of payment of interest on the Convertible Notes or reduce the
amount of principal thereof or modify any of the provisions of the
Convertible Notes with respect to the payment or prepayment thereof;
(ii) give to any Convertible Note any preference or
priority over any other Convertible Note; or
(iii) reduce the percentage of Holders of the Convertible
Notes required to approve any such amendment or effectuate any such
waiver.
(b) In determining whether the Holders of the requisite
principal amount of outstanding Convertible Notes have given any authorization,
consent or waiver under this Section 8.04 or under Section 5.02, Convertible
Notes owned by the Company or any Affiliate thereof shall be
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disregarded and deemed not to be outstanding.
(c) Any such amendment or waiver shall apply equally to all the
Holders of the Convertible Notes and shall be binding upon them, upon each
future Holder of any Convertible Note and upon the Company, whether or not such
Convertible Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
Section 8.05. Manner of Giving Notices. Any notice required to be given
to the Holder hereof by the Company hereunder shall be given by certified
registered mail to the Holder at its address designated on the register referred
to in Section 1.01 on the date of such notice.
Section 8.06. Expenses in Preparation. All expenses of the Lender in the
negotiation, preparation, execution and delivery of this Convertible Note shall
be paid by the Company.
Section 8.07. Other Provisions. The Company waives demand, presentment,
protest, notice of dishonor and any other form of notice, that may be required
to hold the Company liable on this Note.
Section 8.08. Security Interest. The Company hereby grants the Lender
and any Holder a security interest in the Collateral as security for the payment
and performance of all of the Company's obligations under this Convertible Note.
IN WITNESS WHEREOF, the undersigned has caused this Convertible Note to
be signed in its corporate name by one of its officers thereunto duly
authorized, and to be dated as of the date first written above.
AXXESS, INC.
By:
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Title:
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