BONDS.COM GROUP, INC. SECURED CONVERTIBLE PROMISSORY NOTE
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
XXXXX.XXX
GROUP, INC.
|
U.S.
$
|
[ ]
|
THIS SECURED CONVERTIBLE PROMISSORY
NOTE (this “Note”) is made as of
[ ] 0, 2008, by Xxxxx.xxx Group, Inc., a
Delaware corporation (the “Maker”), in favor of
[ ] [ ] or
its assigns (“Payee”).
RECITALS
WHEREAS, this Note is being
issued pursuant to and in connection with a Secured Convertible Note and Warrant
Purchase Agreement dated September 22, 2008 (the “Purchase Agreement”)
among the Maker, the Payee and certain other Purchasers set forth
therein.
NOW, THEREFORE, for and in
consideration of the mutual agreements herein contained, and for and in
consideration of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Maker and Payee hereby covenant
and agree as set forth below.
FOR VALUE RECEIVED, Maker
hereby promises to pay to the order of Payee, the principal sum of
[ ] ($ ), or such lesser amount as
may from time to time be otherwise owing from Maker to Payee under this Note,
together with interest on the principal amount from time to time outstanding
hereunder accrued from the date hereof at the rate and in the manner set forth
below. All payments of principal or interest or both shall be paid as
set forth below, and each such payment shall be made in lawful money of the
United States of America.
This Note
is subject to the following terms and conditions:
1
|
1.
|
Payments
of Principal and Interest.
|
(a) Repayment. Unless
otherwise repaid, exchanged or converted as provided herein, the entire unpaid
principal balance of this Note, together with all accrued but unpaid interest
thereon, shall be due and payable in full on September 22, 2010 (the “Maturity
Date”). Xxxxx’s conversion rights shall be extinguished upon
payment in full of all principal and accrued interest and all other amounts due
hereunder on or after the Maturity Date. Interest shall accrue and be
payable in arrears on the Maturity Date.
(b) Prepayment. The
Maker shall not have the right to repay this Note or any Notes unless consented
to in writing by the Payee.
(c) Manner of
Payment. Maker shall send a written notice to the Holder not
less then 15 days prior to the Maturity Date requesting that the Holder inform
the Maker as to whether the Holder wishes to have the outstanding principal and
interest due under this Note repaid on the Maturity Date in either: (i)
immediately available funds, or (ii) shares of Common Stock at a price per share
equal to the then existing Conversion Price (as defined below) (the “Form of Payment
Instruction”). The Holder shall provide the Form of Payment
Instruction to the Maker in writing no later then three days prior to the
Maturity Date. Maker shall make payment in accordance with the Form of Payment
Instruction and the terms of this Note no later than 5:30 p.m. E.S.T. on the
date when due. Each payment of principal and of interest
shall be paid by Maker without setoff or counterclaim to Payee at Payee’s
address set forth below, or to such other location or accounts within the United
States as Payee may specify in writing to Maker from time to
time. Notwithstanding the foregoing, in the event that the Maker does
not receive the Form of Payment Instruction within the time frame set forth
above, the Maker shall be entitled to choose whether to repay the Note in
immediately available funds or shares of Common Stock.
(d) Cancellation;
Surrender. After all amounts owed on this Note have been
satisfied in full and/or all amounts due under this Note have been converted
into Common Stock, this Note will be surrendered to Maker, duly endorsed, at the
principal offices of Maker or any transfer agent for Maker. Xxxxx
shall also execute and deliver any ancillary agreements as may be reasonably
requested to effect the exchange of this Note. Maker shall pay any
and all issue and other taxes, if any, that may be payable in respect of any
issue or delivery of the securities hereunder.
|
2.
|
Interest
Rate.
|
(a) This
Note will bear interest at the rate of ten percent (10%) per year, from the date
hereof to and including the date of payment, exchange or conversion of this
Note. Interest on this Note shall be calculated on the basis of
actual days elapsed and a 360-day year of twelve 30-day months, compounded
annually.
(b) Interest
on this Note shall be due and payable on the earlier of (i) conversion of the
Notes by the Payee or (iii) the Maturity Date (each such date, an
“Interest Payment
Date”), except that if such date is not a business day then the Interest
Payment Date shall be the next day that is a business day. Any accrued interest
that is not otherwise paid in cash or in shares of Common Stock on the
applicable Interest Payment Date (whether due to Maker’s inability to pay such
interest in cash or in shares of Common Stock) shall automatically, and without
any action on the part of Maker, accrue and be added to the outstanding
principal and interest due under the Note on such Interest Payment
Date.
2
(c) Interest
shall be paid in the same form (i.e. cash or share of Common Stock) as the form
in which the associated principal amount is paid.
|
3.
|
Voluntary
Conversion.
|
(a) Generally. At any
time at which there is principle or interest outstanding under this Note, the
Payee shall be entitled upon written notice to the Maker to convert all of the
principal and interest due hereunder into shares of Common Stock of the Maker.
Such Conversion shall occur upon the date of the provision of such written
notice and shall be effectuated at a price (the “Conversion Price”)
per share equal to the lower of: (i) $0.375 per share (as adjusted for stock
splits, combinations and the like) and (ii) the price per share (as adjusted for
stock splits, combinations and the like) of any shares of Common Stock sold by
the Company to any person or entity other then pursuant to an Excluded
Transaction (as defined below) while this Note is outstanding. For
the purposes hereof, the term Exempted Transaction shall mean: (i) the issuance
of options and/or restricted stock to employees and consultants of the Maker and
approved by the board of directors of the Maker and (ii) warrants issued to
third parties in strategic transactions and approved by the board of directors
of the Maker.
(b) Mechanics of
Conversion. No fractional shares of the Maker’s capital stock
will be issued upon conversion of this Note. In lieu of any
fractional share to which the Payee would otherwise be entitled, the Maker will
pay to the Payee in cash the amount of the unconverted principal and interest
balance of this Note that would otherwise be converted into such fractional
share. Upon conversion of this Note pursuant to this Section 3, the
Payee shall surrender this Note, duly endorsed, at the principal offices of the
Maker or any transfer agent of the Maker. At its expense, the Maker
will, as soon as practicable thereafter, issue and deliver to such Payee, at
such principal office, a certificate or certificates for the number of shares to
which such Payee is entitled upon such conversion, together with any other
securities and property to which the Payee is entitled upon such conversion
under the terms of this Note, including a check payable to the Holder for any
cash amounts payable as described herein. Upon conversion of this
Note, the Maker will be forever released from all of its obligations and
liabilities under this Note with regard to that portion of the principal amount
and accrued interest being converted including without limitation the obligation
to pay such portion of the principal amount and accrued interest.
|
4.
|
Events
of Default. The following are “Events of
Default” hereunder:
|
(a) any
failure by Maker to pay when due all or any principal or accrued interest
hereunder;
(b) any
representation or warranty made by or on behalf of Maker in this Purchase
Agreement proves to have been incorrect, false or misleading in any material
respect on the date of which made;
3
(c) any
failure by Maker to perform any covenant or agreement under this Note or any
other agreement, document or instrument contemplated hereby and such failure
shall remain uncured for a period of fifteen (15) days after receipt by Maker of
written notice of such failure from Payee;
(d) if
Maker or any of its material subsidiaries shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator or any of its
property, (ii) admit in writing its inability to pay its debts as they mature,
(iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated bankrupt or insolvent or be the subject of an order for relief under
Title 11 of the United States Bankruptcy Code, (v) file a voluntary petition in
bankruptcy or a petition for bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law and such petition or proceeding shall remain undismissed or unstayed
for thirty (30) days, or (vi) take or permit to be taken any action in
furtherance of or for the purpose of effecting any of the
foregoing;
(e) any
dissolution, liquidation or winding up of Xxxxx.xxx. or any substantial portion
of their businesses;
(f) any
cessation of operations by Xxxxx.xxx or Xxxxx.xxx is otherwise generally unable
to pay its debts as such debts become due;
(g) if
a default with respect to payment of indebtedness of $100,000 or more occurs
under any other loan agreement, note or other instrument or evidence of
indebtedness of Maker and continues beyond any applicable grace period therein
provided; or
provided,
however, that with respect to any Event of Default (other than under Section 5(a) (with
respect to payment of principal), 5(d), or 5(e)), the Maker
shall have ten (10) business days to cure such Event of Default following the
receipt of a written notice of such Default from the Payee.
5. Remedies
on Default. If any Event of Default shall occur and be
continuing, then the entire principal and all accrued interest under this Note
shall, at the option of Payee (except in the case of an Event of Default under
Section 5(d) or
5(e) above, in
which event acceleration shall be automatic), become immediately due and
payable, without notice or demand and such principal and accrued interest shall
be paid by the Maker in accordance with the provisions of Section 1(c)
hereof.
6. Certain
Waivers. Except as otherwise expressly provided in this Note,
Maker hereby waives diligence, demand, presentment for payment, protest,
dishonor, nonpayment, default and notice of any and all of the
foregoing.
7. No
Impairment. Maker will not, by amendment of its articles of
incorporation, bylaws, or through reorganization, consolidation, merger,
dissolution, sale of assets, or another voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Note, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of Payee against impairment.
4
8. Amendments. This
Note may not be changed orally, but only by an agreement in writing and signed
by holders holding at least a majority of the principal amounts outstanding
under the Notes.
9. GOVERNING
LAW; JURISDICTION; WAIVER OF JURY TRIAL. THIS NOTE SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF FLORIDA AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS
LOCATED IN PALM BEACH COUNTY, FLORIDA, AND ANY APPELLATE COURT FROM ANY THEREOF,
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OF FLORIDA
OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. NOTHING IN THIS NOTE
OR ANY OTHER LOAN DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
10. Notices. All
notices and communications shall be in writing and shall be delivered pursuant
to the addresses and consistent with the procedures set forth in the Purchase
Agreement.
11. Transaction
and Enforcement Costs. In the event that Payee shall, after
the occurrence and during the continuance of an Event of Default (and provided
that Payee shall be permitted, at such time, to enforce its rights hereunder and
retain payments received hereunder), turn this Note over to an attorney for
collection, Maker shall further be obligated to Payee for Xxxxx’s reasonable
attorneys’ fees and expenses incurred in connection with such collection as well
as any other reasonable costs incurred by Payee in connection with the
collection of all amounts due hereunder.
12. Loss,
Theft, Destruction or Mutilation of Note. Upon notice by Payee
to Maker of the loss, theft, destruction or mutilation of this Note, and upon
surrender and cancellation of this Note, if mutilated, Maker, as its expense,
will make and deliver a new note of like tenor, in lieu of this Note, subject to
receipt of an Affidavit of Loss by the Company and reasonably satisfactory
indemnification (as determined by the Company).
13. Successors
and Assigns. This Note and the obligations and rights of Maker
hereunder, shall be binding upon and inure to the benefit of Maker, the holder
of this Note, and their respective successors and assigns. This Note
shall not be assigned by the Maker or Payee whether by contract or by law, or in
a merger or any other similar transaction.
14. Severability. In
the event that any provision of this Note becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Note will
continue in full force and effect without said provision and the parties agree
to replace such provision with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such provisions; provided,
however, that no such severability will be effective against a party if
it materially and adversely changes the economic benefits of this Note to such
party.
5
15. Further
Assurances. Maker and its agents shall each cooperate with
Payee and use (or cause its agents to use) its best efforts to promptly (i) take
or cause to be taken all necessary actions, and do or cause to be done all
things necessary, proper or advisable under this Note and applicable laws to
consummate and make effective all transactions contemplated by this Note as soon
as practicable following the request of Payee, and (ii) obtain all approvals
required to be obtained from any third party necessary, proper or advisable to
the transactions contemplated by this Note.
16. Usury. Notwithstanding
any provision to the contrary contained in this Note, or any and all other
instruments or documents executed in connection herewith, Maker and Payee intend
that the obligations evidenced by this Note conform strictly to the applicable
usury laws from time to time in force. If, under any circumstances
whatsoever, fulfillment of any provisions thereof or any other document, at the
time performance of such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
6
IN WITNESS WHEREOF, Maker has
duly caused this Note to be signed on its behalf, in its company name and by its
duly authorized officer as of the date first set forth above.
|
XXXXX.XXX
GROUP, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
7
NOTICE OF
CONVERSION
The
undersigned hereby irrevocably elects to exercise the right set forth in Section
3 of the Promissory Note of XXXXX.XXX GROUP, INC. dated as
of ________________,
20____, to
convert $ ____________________
of principal due under such Promissory Note (and all associated accrued
interest) into shares of Common Stock of XXXXX.XXX GROUP, INC. at a
Conversion Price of $0.375 per share, for an aggregate total of ____________
shares of Common Stock.
Please
deliver the stock certificate to:
|
Dated:
|
|
[Name
of
Xxxxxx]
|
|
By:
|
8
