EXHIBIT 4.2
THIS CONVERTIBLE NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, OR ANY SUCH OFFER, SALE OR TRANSFER IS MADE UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
CONVERTIBLE NOTE
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Date: December 6, 2000 $10,000,000
FOR VALUE RECEIVED, CELLPOINT INC., a corporation organized under the laws
of the State of Nevada (the "CORPORATION"), hereby promises to pay to the order
of CASTLE CREEK TECHNOLOGY PARTNERS, LLC or any assign registered on the books
and records of the Corporation (individually, the "HOLDER," and collectively
with the holders of all other notes of same like and tenor, the "HOLDERS") the
sum of TEN MILLION DOLLARS ($10,000,000) on September 30, 2002 (the "SCHEDULED
MATURITY DATE"), and to pay interest on the unpaid principal balance hereof for
each year (or portion thereof) that this Note is outstanding in an amount equal
to six percent (6.0%) per annum, compounded semi-annually. Interest shall be
paid semi-annually on each June 30 and December 31 on the unpaid principal
balance hereof from the date hereof (the "ISSUE DATE") until the same becomes
due and payable. Any amounts on this Note which are not paid when due shall bear
interest at the rate equal to the lower of fifteen percent (15%) per annum and
the highest rate permitted by law from the due date thereof until the same is
paid. Interest shall be calculated based on a 360-day year and shall commence
accruing on the Issue Date and, to the extent not previously paid in accordance
with the provisions hereof, shall be payable at such time as the outstanding
principal balance hereof with respect to which such interest has accrued becomes
due and payable hereunder. All payments of principal and interest (to the extent
not converted in accordance with the terms hereof) shall be made in, and all
references herein to monetary denominations shall refer to, lawful money of the
United States of America. All payments shall be made at such address as the
Holder shall have given or shall hereafter give to the Corporation by written
notice in accordance with the provisions of this Note.
This Note is being issued by the Corporation pursuant to that certain
Securities Purchase Agreement, dated as of the date hereof, by and between the
Corporation and the Holder (the "SECURITIES PURCHASE Agreement"). Substantially
the same notes (the "OTHER NOTES" and, together with this Note, the "NOTES") may
be issued to permitted transferees of this Note.
ARTICLE I
PREPAYMENT
1.1 PREPAYMENT AT CORPORATION'S OPTION. This Note may be prepaid
in whole or in part at the option of the Corporation upon forty-five (45)
days' prior written notice to the Holder (which notice shall specify the
principal amount to be prepaid, the date of prepayment and the Aggregate
Prepayment and shall contain a representation that the Corporation has cash
on hand or available through credit facilities by the date specified for
prepayment of an amount equal to the Aggregate Prepayment) (the "PREPAYMENT
NOTICE") without the prior written consent of the Holder, by the
Corporation's payment in cash to the Holder of an amount (the "AGGREGATE
PREPAYMENT") equal to the sum of (i) the Applicable Percentage of the
principal amount being prepaid plus (ii) all accrued and unpaid interest on
such amount. The "APPLICABLE PERCENTAGE" shall be one hundred fifteen percent
(115%) for prepayments made prior to June 5, 2001 and one hundred twenty
percent (120%) for prepayments made on or after such date. This Note may be
converted in accordance with Article III in whole or in part during the
foregoing forty-five (45) day period and the Aggregate Prepayment shall be
reduced to reflect any conversions during such period. At the time of any
prepayment, the Corporation shall issue to the Holder warrants (the
"PREPAYMENT WARRANTS") exercisable for five (5) years from the date of
issuance in the form of the Initial Warrants to purchase a number of shares
of Common Stock equal to the Prepayment Coverage Amount with an exercise
price (the "PREPAYMENT WARRANT EXERCISE PRICE") equal to the Prepayment
Market Price on the date of the Prepayment Notice. "PREPAYMENT MARKET PRICE"
shall mean the lesser of (i) the average of the Closing Bid Prices during the
period of ten (10) Trading days ending on the Trading Day immediately prior
to the date of prepayment, and (ii) the Closing Bid Price on the Trading Day
immediately prior to the date of prepayment. The "PREPAYMENT COVERAGE AMOUNT"
shall equal five percent (5%) of the Aggregate Prepayment divided by the
Prepayment Warrant Exercise Price. Notwithstanding the foregoing, the
Corporation may prepay at its option only if (a) all of the Common Stock
issuable upon exercise of the Prepayment Warrants is covered by a
Registration Statement (as defined in the Registration Rights Agreement
referenced below) that has been filed (but has not necessarily been declared
effective) at the date of prepayment, (b) as of the date of the Prepayment
Notice and the date of prepayment, the Common Stock (including all Common
Stock issuable upon the exercise of the Warrants) is listed for trading on
NASDAQ or the New York Stock Exchange, (c) as of the date of the Prepayment
Notice and the date of prepayment, the Corporation has cash on hand or
available through credit facilities by the date specified for prepayment of
an amount equal to the Aggregate Prepayment, and (d) as of the date of the
Prepayment Notice and the date of prepayment, no event has occurred which
constitutes an Event of Default (as defined in Section 7.1 hereof) or which
would constitute an Event of Default with notice or the passage of time or
both which has not been cured or waived to the satisfaction of the Holders.
If the Corporation issues a Prepayment Notice and fails to pay the Aggregate
Prepayment and issue the Prepayment Warrants in full accordance with this
Section 1.1 on the date specified for
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prepayment, the Corporation's right to make prepayments pursuant to this
Section 1.1 shall immediately terminate permanently.
1.2 PREPAYMENT AT HOLDER'S OPTION UPON FAILURE TO OBTAIN STOCKHOLDER
APPROVAL. The Holder shall have the right to require the Corporation to prepay
the Note in whole or in part from time to time on thirty (30) days' prior
written notice to the Corporation (which notice shall specify the principal
amount to be prepaid and the date of repayment) for an amount equal to the sum
of (i) one hundred twenty percent (120%) of the principal amount being prepaid
and (ii) all accrued and unpaid interest on such portion of the principal
amount, if (A) the Company's stockholders do not approve the Stockholder Matters
(as defined in Section 4(k) of the Securities Purchase Agreement) at the Next
Annual Meeting (as defined in Section 4(k) of the Securities Purchase Agreement)
or the special meeting of stockholders, as the case may be, held in accordance
with Section 4(k)(i) or (ii) of the Securities Purchase Agreement; or (B) a
Trigger Event occurs at any time on or after July 31, 2002. Notwithstanding the
foregoing, if a Trigger Event occurs at any time on or after August 31, 2002,
the Holder shall not be required to give notice to the Company under this
Section 1.2 more than two (2) days prior to the Scheduled Maturity Date and the
repayment shall be made on the business day prior to the Scheduled Maturity
Date. Notwithstanding anything in this Section 1.2 to the contrary, the Holder
shall not have the right to require the Corporation to prepay this Note under
Section 1.2(A) hereof, if the Corporation is not required pursuant to Section
4(k) of the Securities Purchase Agreement to submit the Stockholder Matters to
the Company's stockholders for approval.
1.3 PREPAYMENT AT HOLDERS OPTION UPON AN EVENT OF DEFAULT. Upon the
occurrence of an Event of Default (as defined below) and the election by the
Holder to require prepayment, this Note shall be prepaid by the Corporation in
accordance with the provisions of Article VII hereof; provided, however, that
notwithstanding anything herein to the contrary, but subject to the Company's
compliance with Section 8.2 hereof, the Holder shall make such election in the
case of an Event of Default described in Section 7.1(f), no later than the later
of (a) ten (10 ) days prior to the effective date of the transaction that would
constitute such Event of Default or (b) fifteen (15) days after the Holder
receives notice required pursuant to Section 8.2(i) with respect to the
applicable transaction.
ARTICLE II
CERTAIN DEFINITIONS
The following terms shall have the following meanings:
2.1 "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal United States securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg Financial Markets (or a comparable reporting service of national
reputation selected by the Corporation and reasonably acceptable to Holders of a
majority of the aggregate principal amount represented by the then outstanding
Notes ("MAJORITY HOLDERS") if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (collectively, "BLOOMBERG"), or if the
foregoing does not apply, the last reported sale price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no sale price is
3
reported for such security by Bloomberg, the average of the bid prices of all
market makers for such security as reported in the "PINK SHEETS" by the National
Quotation Bureau, Inc., in each case for such date or, if such date was not a
trading day for such security, on the next preceding date which was a trading
date. If the Closing Bid Price cannot be calculated for such security as of
either of such dates on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Corporation and
reasonably acceptable to the Majority Holders, with the costs of such appraisal
to be borne by the Corporation.
2.2 "COMMON STOCK" means the Corporation's common stock, par value
$.001 per share.
2.3 "CONVERSION AMOUNT" means the portion of the principal amount of
this Note being converted plus any accrued and unpaid interest thereon through
the Conversion Date (unless the Holder elects in the Notice of Conversion to
have such interest paid in cash), each as specified in the notice of conversion
in the form attached hereto (the "NOTICE OF CONVERSION").
2.4 "CONVERSION DATE" means the date specified in the Notice of
Conversion so long as the copy of the Notice of Conversion is faxed (or
delivered by other means resulting in notice) to the Corporation at or before
5:59 p.m., New York City time, on the Conversion Date indicated in the Notice of
Conversion; provided, however, that if the Notice of Conversion is not so faxed
or otherwise delivered before such time, then the Conversion Date shall be the
date the Holder faxes or otherwise delivers the Notice of Conversion to the
Corporation.
2.5 "CONVERSION PRICE" means, (i) prior to June 5, 2001, the Fixed
Conversion Price; and (ii) on or after June 5, 2001, the lower of the Fixed
Conversion Price and the Adjusted Conversion Price determined as of the
Conversion Date. The Conversion Price shall be subject to adjustment as provided
herein.
2.6 "FIXED CONVERSION PRICE" means Twenty-five Dollars ($25.00), and
shall be subject to adjustment as provided herein.
2.7 "ADJUSTED CONVERSION PRICE" means, as of any date of
determination, ninety percent (90%) of the average of the five (5) lowest Volume
Weighted Average Prices during the period of twenty (20) consecutive Trading
days (subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events during such period), ending on the Trading
Day immediately prior to the date of determination. The Adjusted Conversion
Price shall be subject to adjustment as provided herein.
2.8 "INITIAL WARRANTS" shall mean the warrants issued by the
Corporation to the initial Holder pursuant to the Securities Purchase Agreement.
2.9 "WARRANTS" shall mean the Initial Warrants and the
Prepayment Warrants, if any.
4
2.10. "VOLUME WEIGHTED AVERAGE PRICE" means as of any date the
volume weighted average price for the shares of Common Stock on the NASDAQ
National Market ("NASDAQ") for such date as reported by Bloomberg; provided,
however, if Bloomberg is not then reporting the Volume Weighted Average Price,
the Volume Weighted Average Price shall be deemed to be the Closing Bid Price
for that date.
ARTICLE III
CONVERSION
3.1 CONVERSION AT THE OPTION OF THE HOLDER. Subject to the
limitations on conversions contained in Section 3.3 of this Article III, the
Holder may, at any time and from time to time on or after the Issue Date,
convert (a "CONVERSION") all or any part of the outstanding principal amount of
this Note, plus all accrued interest thereon through the Conversion Date (unless
the Holder elects in the Notice of Conversion to have such interest paid in
cash), into a number of fully paid and nonassessable shares of Common Stock
determined in accordance with the following formula:
Conversion Amount
--------------------
Conversion Price
3.2 MECHANICS OF CONVERSION. In order to effect a Conversion, a
Holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice
of Conversion to the Corporation and (y) surrender or cause to be surrendered
this Note, duly endorsed, along with a copy of the Notice of Conversion as soon
as practicable thereafter to the Corporation. Upon receipt by the Corporation of
a facsimile copy of a Notice of Conversion from a Holder, the Corporation shall
immediately send, via facsimile, a confirmation to such Holder stating that the
Notice of Conversion has been received, the date upon which the Corporation
expects to deliver the Common Stock issuable upon such conversion and the name
and telephone number of a contact person at the Corporation regarding the
conversion. The Corporation shall not be obligated to issue shares of Common
Stock upon a conversion unless either this Note is delivered to the Corporation
as provided above, or the Holder notifies the Corporation or the transfer agent
that this Note has been lost, stolen or destroyed and delivers the documentation
to the Corporation required by Section 9.8 hereof.
(a) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the
surrender of this Note accompanied by a Notice of Conversion, the Corporation
shall, no later than the later of (a) the third business day following the
Conversion Date and (b) the business day following the date of such surrender
(or, in the case of lost, stolen or destroyed certificates, after delivery of
the documentation required by Section 9.8 hereof) (the "DELIVERY PERIOD"), issue
and deliver to the Holder or its nominee (x) that number of shares of Common
Stock issuable upon conversion of the portion of this Note being converted and
(y) a new Note in the form hereof representing the balance of the principal
amount hereof not being converted, if any. If the Corporation's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend and the Holder thereof is not then required to return such
certificate for the placement of a legend thereon and the Holder has provided
the Company with information required by DTC relating to
5
the DTC account of the Holder or such Holder's nominee, the Corporation shall
cause its transfer agent to electronically transmit the Common Stock issuable
upon conversion to the Holder by crediting the account of the Holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC
TRANSFER"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Corporation shall deliver to the Holder physical certificates
representing the Common Stock issuable upon conversion. Further, even if the
aforementioned conditions to a DTC Transfer are satisified a Holder may instruct
the Corporation in writing to deliver to the Holder physical certificates
representing the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer. If the Holder elects to receive in cash
interest on the principal amount being converted, such amount shall be paid to
Holder at the time of delivery of the Common Stock in accordance with this
Section 3.2(a).
(b) TAXES. The Corporation shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of the shares
of Common Stock upon the conversion of this Note (including a Mandatory
Conversion).
(c) NO FRACTIONAL SHARES. If any conversion of this Note would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares of Common Stock issuable
upon conversion of the Notes shall be the next higher whole number of shares.
(d) CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with Section 3.2(a)
above.
3.3 LIMITATIONS ON CONVERSIONS. The conversion of this Note shall be
subject to the following limitations (each of which limitations shall be applied
independently):
(a) CAP AMOUNT. Notwithstanding anything to the contrary
contained herein, unless stockholder approval in accordance with Section 4(k) of
the Securities Purchase Agreement has been obtained, this Note shall not be
convertible to the extent that such conversion would result in the issuance of
more than Two Million One Hundred Nine Thousand Seven Hundred Seventeen
(2,109,717) shares of Common Stock (the "CAP AMOUNT") in the aggregate pursuant
to the conversion of the Notes and the exercise of the Warrants.
(b) NO FIVE PERCENT HOLDERS. Notwithstanding anything to the
contrary contained herein, this Note shall not be convertible by a Holder to the
extent (but only to the extent) that, if convertible by such Holder, such Holder
would be the beneficial owner of more than 4.99% of the shares of Common Stock.
For the purposes of this paragraph, beneficial ownership and all determinations
and calculations related thereto shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and all applicable
rules and regulations. For clarification, it is expressly a term of this
security that the limitations contained in this paragraph shall apply to each
successor Holder. The restriction contained in this Section 3.3(b) may not be
altered, amended, deleted or changed in any manner whatsoever unless the holders
of a majority of the outstanding shares of Common Stock and the Holder shall
approve such alteration, amendment, deletion or change.
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ARTICLE IV
RESERVATION OF SHARES OF COMMON STOCK
On the Issue Date, the Corporation shall reserve Two Million
(2,000,000) shares of the authorized but unissued shares of Common Stock for
issuance upon conversion of the Notes, and upon exercise of the Warrants and
thereafter the number of authorized but unissued shares of Common Stock so
reserved (the "RESERVED AMOUNT") shall not be decreased and shall thereafter be
increased if necessary so that at all times the Reserved Amount shall equal the
sum of 200% of the number of Conversion Shares issuable upon conversion of the
Notes outstanding, using the applicable Conversion Price and 100% of the Warrant
Shares issuable upon the exercise of the Warrants outstanding (without regard to
the limitations set forth in Section 3.3 of the Note and Section 7(g) of the
Warrant). The Reserved Amount shall be allocated to the Holders of the Notes as
provided in Section 9.4.
ARTICLE V
FAILURE TO SATISFY CONVERSION DEFAULTS
If, at any time, (1) a Holder submits a Notice of Conversion and the
Corporation fails for any reason to deliver by way of DTC transfer or otherwise,
on or prior to the expiration of five (5) trading days following the Delivery
Period for such conversion, such number of shares of Common Stock to which such
Holder is entitled upon such conversion (and free of any restrictive legend if
such Holder is then entitled to unlegended shares under the Securities Purchase
Agreement), or (2) the Corporation provides notice to any Holder at any time of
its intention not to issue shares of Common Stock upon exercise (including by
way of public announcement) to such Holder in accordance with the terms of this
Note (the "CONVERSION REFUSAL DATE") or (3) after the Securities and Exchange
Commission (the "SEC") has declared effective the first Registration Statement
required to be filed pursuant to Section 2(a) of the Registration Rights
Agreement, the Corporation fails to deliver certificates representing Common
Stock to the Holder free from any restrictive legend within five trading days
following the request by the Holder for removal of such restrictive legend (the
"REMOVAL DATE") (each of (1), (2) and (3) being a "CONVERSION DEFAULT"), then
the Corporation shall pay to such Holder damages in an amount equal to the
product of (x) the Damages Amount times (y) the number of Conversion Default
Days times (z) 0.01, where:
"CONVERSION DEFAULT DAYS" means the number of days beginning and
including the Conversion Date or Removal Date or Conversion Refusal Date, as
applicable, through and including the Cure Date with respect to such Conversion
Default;
"DAMAGES AMOUNT" means the outstanding principal amount of the Note
owned by Holder immediately prior to the occurrence of the Conversion Default
plus accrued and unpaid interest thereon as of the first day of the Conversion
Default.
"CURE DATE" means (i) with respect to a Conversion Default described
in subclause (1) of the definition of Conversion Default above, the date the
Corporation effects the
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conversion of the portion of the Note submitted for conversion (or such earlier
date that the Holder voids the conversion as provided herein but in no event
earlier than the date the Company acknowledges in writing to the holder of the
existence of a default and the Company's intention to remedy such default; (ii)
with respect to a Conversion Default described in subclause (2) of the
definition of Conversion Default above, the date the Corporation rescinds in
writing its notice or intent not to issue shares of Common Stock upon exercise
and affirmatively agrees in writing to abide by the conversion terms of this
Note, and (iii) with respect to a Conversion Default described in subclause (3)
of the definition of Conversion Default above, the date the Company delivers
certificates representing the shares of Common Stock, free from any restrictive
legend to the extent required by the Securities Purchase Agreement.
The payments to which a Holder shall be entitled pursuant to this Article
5 are referred to herein as "CONVERSION DEFAULT PAYMENTS." All Conversion
Default Payments shall be paid in cash within ten (10) trading days of a
Holder's demand therefore (which demand may be made at any time and from time to
time). Notwithstanding the foregoing, no Conversion Default Payment shall be
required if delivery of the applicable certificates is made within five (5)
trading days after the end of the applicable Delivery Period. If such delivery
is not made by such date, the first Conversion Default Day shall be the
Conversion Date. Upon the occurrence of a Conversion Default and at all times
thereafter, the Fixed Conversion Price shall be the lesser of (a) the Fixed
Conversion Price applicable at the time of the Notice of Conversion which
resulted in the Conversion Default and (b) the lowest applicable Adjusted
Conversion Price on any Conversion Default Day.
ARTICLE VI
INTENTIONALLY OMITTED
ARTICLE VII
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. In the event (each of the events described in
clauses (a)-(i) below after expiration of the applicable cure period (if any)
being an "EVENT OF DEFAULT"):
(a) the Corporation fails to pay, when due, or within any
applicable grace period, any payment with respect to any indebtedness of the
Corporation in excess of $500,000 due to any third party (including, without
limitation, any of the Other Notes), other than payments contested by the
Corporation in good faith, or otherwise is in breach or violation of any
agreement for monies owed or owing in an amount in excess of $500,000 which
breach or violation permits the other party thereto to declare a default or
otherwise accelerate amounts due thereunder;
(b) the Common Stock (including any of the shares of Common
Stock issuable upon conversion of the Notes) is suspended from trading on any
of, or is not listed (and authorized) for trading on at least one of, the NYSE,
the AMEX or NASDAQ for an aggregate of ten trading days in any nine month
period;
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(c) the Registration Statement referred to in Section 2(a) of
the Registration Rights Agreement has not been declared effective by the 180th
day following the Issue Date or such Registration Statement (or any successor
registration statement on Form S-3), after being declared effective, cannot be
utilized by the Holders of the Notes for the resale of all of their Registrable
Securities (as defined in the Registration Rights Agreement) for an aggregate of
more than 45 days;
(d) after the SEC declared effective the first Registration
Statement required to be filed pursuant to Section 2(a) of the Registration
Rights Agreement, the Corporation fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the Holders of the Notes
upon conversion of any of the Notes as and when required by this Note, the
Securities Purchase Agreement or the Registration Rights Agreement (a "LEGEND
REMOVAL FAILURE"), and any such failure continues uncured for ten trading days
after the Corporation has been notified thereof in writing by the Holder;
(e) the Corporation provides notice (or otherwise indicates)
to any Holder of the Notes, including by way of public announcement, at any
time, of its intention not to issue, or otherwise refuses to issue, shares of
Common Stock to any Holder of the Notes upon conversion in accordance with the
terms of the Notes;
(f) the Corporation shall be acquired or shall otherwise sell
or transfer all or substantially all of its assets; or the Corporation shall be
party to a merger, consolidation or similar transaction unless (i) the
Corporation is the surviving entity of such transaction; and (ii) the
Corporation's stockholders prior to such transaction hold the majority of the
votes that are entitled to be voted in elections of directors after such
transaction.
(g) the Corporation otherwise shall breach any material term
hereunder (including, without limitation, Article IV hereof) or under the
Securities Purchase Agreement, the Registration Rights Agreement or the
Warrants, including, without limitation, the representations and warranties (as
of the date made) and covenants contained therein and if such breach if curable,
remains uncured for more than 30 days after the Corporation has been notified
thereof in writing by the Holder or the Corporation fails to diligently pursue
the cure of such breach at any time during such 30-day period;
(h) the Corporation or any subsidiary of the Corporation 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;
(i) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any subsidiary of the Corporation and if instituted against the Corporation by a
third party, shall not be dismissed within 60 days of their initiation; or
(j) the Company shall have failed within the time period set
forth in
9
Section 4(p) of the Securities Purchase Agreement to increase the number of
authorized shares of its Common Stock as provided in Section 4(p) of the
Securities Purchase Agreement.
Upon the occurrence of any such Event of Default, at the option of
each Holder, exercisable in whole or in part at any time and from time to time
by delivery of a Default Notice (as defined below) to the Corporation while such
Event of Default continues, the Corporation shall pay such Holder (and upon the
occurrence of an Event of Default specified in clauses (h) and (i) this Section
7.1, the Corporation shall be required to pay the Holders), in satisfaction of
its obligation to pay the outstanding principal amount of the Notes and accrued
and unpaid interest thereon, an amount equal to the Default Amount and such
Default Amount shall immediately become due and payable, all without demand,
presentment or notice, all of which are hereby expressly waived, together with
all costs, including, without limitation, legal fees and expenses of collection,
and the Holder shall be entitled to exercise all other rights and remedies
available at law or in equity for the avoidance of doubt, the occurrence of any
event described in clauses (e), (h) or (i) above shall immediately constitute an
Event of Default and there shall be no cure period.
Following the submission of a Default Notice, the Holder of this
Note shall have the right to continue to submit Notices of Conversion and to
convert this Note until such time (if any) as the Corporation pays to the Holder
the Default Amount. To the extent a Note is converted after the submission of a
Default Notice, the Default Amount applicable to the amount of the Note so
converted shall be extinguished.
Upon the occurrence of an Event of Default or the Corporation's
receipt of any Default Notice hereunder, the Corporation shall immediately (and
in any event within one trading day following such receipt) deliver a written
notice (a "DEFAULT ANNOUNCEMENT") to all Holders of the Notes stating the
details of the Event of Default and, if applicable, the date upon which the
Corporation received such Default Notice and the amount of the Notes covered
thereby. At any time and from time to time, each Holder of the Notes may request
(either orally or in writing) information from the Corporation with respect to
the instant Event of Default (including, but not limited to, the aggregate
principal amount outstanding of Notes covered by Default Notices received by the
Corporation) and the Corporation shall furnish (either orally or in writing) as
soon as practicable such requested information to such requesting Holder. In the
event the Corporation is not able to repay all of the outstanding Notes within
five trading days after its receipt of a notice requiring such payment (a
"DEFAULT NOTICE") the Corporation shall repay the outstanding Notes to each
Holder pro rata, based on the total amounts due under the Notes at the time of
repayment included by such Holder in all Default Notices delivered prior to the
date upon which such repayment is to be effected relative to the total amounts
due under all Notes at the time of repayment included in all of the Default
Notices delivered prior to the date upon which such repayment is to be effected;
PROVIDED, HOWEVER, the foregoing shall not constitute a waiver by any Holder of
its rights to payment in full of the total Default Amount due under each such
Holder's Notes.
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7.2 DEFINITION OF DEFAULT AMOUNT. The "Default Amount" with
respect to a Note means an amount equal to the greater of:
(i) V X M
--------------------
C P
and (ii) V X 120%
where:
"V" means the aggregate principal amount of the Notes being paid plus all
accrued and unpaid interest thereon through the payment date;
"CP" means the Conversion Price in effect on the date on which the
Corporation receives the Default Notice; and
"M" means the highest Closing Bid Price of the Corporation's Common Stock
during the period beginning on the date on which the Corporation receives the
Default Notice and ending on the date immediately preceding the trading day of
payment of the Default Amount.
ARTICLE VIII
ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as
follows:
8.1 STOCK SPLITS, STOCK DIVIDENDS, ETC. If, at any time on or after
the Issue Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, or other similar event, the
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
8.2 ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time
after the Issue Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation, merger or acquisition of
the Corporation with or by any other entity (other than a merger in which the
Corporation is the surviving or continuing entity and its capital stock is
unchanged), (iii) any sale or transfer of all or substantially all of the assets
of the Corporation (iv) any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property (each of (i) - (iv) above being a "Corporate Change"), then the Holders
of the Notes shall thereafter have the right to receive upon conversion, in lieu
of the shares of Common Stock otherwise issuable, such shares of stock,
securities and/or other property as would have been issued or payable in such
Corporate Change with respect to or in exchange for the number of shares of
Common Stock which would have been issuable upon conversion
11
(without giving effect to the limitations contained in Section 3.3) had such
Corporate Change not taken place, and in any such case, the provisions hereof
(including, without limitation, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is not the Corporation,
an immediate adjustment of the Conversion Price so that the Conversion Price
immediately after the Corporate Change reflects the same relative value as
compared to the value of the surviving entity's common stock that existed
between such Conversion Price and the value of the Corporation's Common Stock
immediately prior to such Corporate Change) shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the conversion thereof. The Corporation shall not
effect any Corporate Change unless (i) each Holder of the Notes has received
written notice of such transaction at least 30 days prior thereto, but in no
event later than 20 days prior to the record date for the determination of
stockholders entitled to vote with respect thereto, and (ii) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument (in form and substance reasonably satisfactory to the Holders of a
majority of the principal amount of the Notes then outstanding) the obligations
of the Notes. The above provisions shall apply regardless of whether or not
there would have been a sufficient number of shares of Common Stock authorized
and available for issuance upon conversion of the Notes outstanding as of the
date of such transaction, and shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
8.3 ADJUSTMENT DUE TO DISTRIBUTION. If, at any time after the Issue
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"), then the Holders of the Notes shall be entitled, upon any
conversion of the Notes after the date of record for determining stockholders
entitled to such Distribution (or at maturity to the extent that the Notes have
not then been converted in full) to receive the amount of such assets which
would have been payable to the Holder with respect to the shares of Common Stock
issuable upon such conversion (without giving effect to the limitations
contained in Section 3.3) had such Holder been the holder of such shares of
Common Stock on the record date for the determination of stockholders entitled
to such Distribution. If the Distribution involves rights, warrants, options or
any other form of convertible securities and the right to exercise or convert
such securities would expire in accordance with its terms prior to the
conversion of this Note, then the terms of such securities shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the Holder of the Notes receive such securities pursuant to the
conversion hereof.
8.4 ISSUANCE OF OTHER SECURITIES. If, at any time after the Issue
Date, the Corporation shall issue any securities, adjustments in the Fixed
Conversion Price shall be made as follows:
(a) ADJUSTMENT OF FIXED CONVERSION PRICE. If the Corporation
issues or sells, or in accordance with Section 8.4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price on the Measurement Date (as
such terms are hereinafter defined) (a "Dilutive Issuance"), then
12
effective immediately upon the Dilutive Issuance, the Fixed Conversion Price
will be adjusted in accordance with the following formula:
C' = C x O + P/M
---------------------
CSDO
where:
C' = the adjusted Fixed Conversion Price;
C = the Fixed Conversion Price on the Measurement Date;
M = the Market Price on the Measurement Date;
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 8.4(b) hereof, received by the Corporation upon
such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the
Dilutive Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 8.4(a) if such adjustment would result in an increase in the Fixed
Conversion Price.
(b) EFFECT ON FIXED CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Fixed Conversion Price under Section
8.4(a) hereof, the following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "OPTIONS") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price in effect on the Measurement Date ("BELOW
MARKET OPTIONS"), then the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed
to be outstanding and to have been issued and sold by the Corporation for such
price per share. For purposes of the preceding sentence, the "price per share
for which Common Stock is issuable upon the exercise of such Below Market
Options" is determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or granting of
all such Below Market Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Below Market Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Below Market Options, the minimum aggregate amount of
additional consideration payable upon the exercise, conversion or exchange
thereof at the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (ii) the
13
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Conversion Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options. If, in any case, the total
number of shares of Common Stock issuable upon exercise of any Below Market
Options or upon exercise, conversion or exchange of any Convertible Securities
is not, in fact, issued and the rights to exercise such option or to exercise,
convert or exchange such Convertible Securities shall have expired or
terminated, the Conversion Price then in effect will be readjusted to the
Conversion Price which would have been in effect at the time of such expiration
or termination had such Below Market Options or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Corporation in any manner issues or
sells any Convertible Securities, whether or not immediately convertible (other
than where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Section 8.4(b)(ii)(B) if applicable) is less
than the Market Price in effect on the Measurement Date, then the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Corporation for such price per share. For the purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon such exercise, conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as consideration
for the issuance or sale of all such Convertible Securities (taking into account
the value of any warrants or other securities issued to the purchasers of such
Convertible Securities), plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon exercise, conversion
or exchange of such Convertible Securities.
(B) If the Corporation in any manner issues or
sells any Convertible Securities with a fluctuating conversion or exercise price
or exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Section 8.4(b)(ii)(A)
shall be deemed to be the price per share which would be applicable (assuming
all holding period and other conditions to any discounts contained in such
Convertible Security have been satisfied) if the Market Price on the Measurement
Date is assumed for purposes of this calculation to be 80% of the Market Price
on such date (the
14
"ASSUMED VARIABLE MARKET PRICE"). Further, if the Market Price at any time or
times thereafter is less than or equal to the Assumed Variable Market Price last
used for making any adjustment under this Section 8.4 with respect to any
Variable Rate Convertible Security, the Conversion Price in effect at such time
shall be readjusted to equal the Conversion Price which would have resulted if
the Assumed Variable Market Price at the time of issuance of the Variable Rate
Convertible Security had been 80% of the Market Price existing at the time of
the adjustment required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Corporation upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to protect
against dilution), the Fixed Conversion Price in effect at the time of such
change will be readjusted to the Fixed Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.
(iv) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Note will be the amount
received by the Corporation therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Corporation in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration part or all of which shall be other than cash,
including, in the case of a strategic or similar arrangement in which the other
entity will provide services to the Corporation, purchase services from the
Corporation or otherwise provide intangible consideration to the Corporation,
the amount of the consideration other than cash received by the Corporation
(including the net present value of the contribution expected by the Corporation
for the provided or purchased services) will be the fair market value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Corporation will be the Market
Price thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any merger or consolidation
in which the Corporation is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The Corporation shall calculate, using standard commercial
valuation methods appropriate for valuing such assets, the fair market value of
any consideration other than cash or securities; PROVIDED, HOWEVER, that if the
Holder does not agree to such fair market value calculation within three trading
days after receipt thereof from the Corporation, then such fair market value
will be determined in good faith by an investment banker or other appropriate
expert of national reputation selected by the Corporation and reasonably
acceptable to the Holder hereof, with the costs of such appraisal to be borne by
the Corporation.
15
(v) EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE. No
adjustment to the Fixed Conversion Price will be made (i) upon the exercise of
any Options or Convertible Securities issued and outstanding on the Issue Date
and set forth on Schedule 3(d) of the Securities Purchase Agreement in
accordance with the terms of such securities as of such date; (ii) upon the
grant or exercise of any stock, warrants or options which may hereafter be
granted or exercised under any employee benefit plan of the Corporation now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved in accordance with the terms of such employee
benefit plan; (iii) upon the issuance of any Notes and Initial Warrants in
accordance with the terms of the Securities Purchase Agreement; (iv) upon the
issuance of the Prepayment Warrants in accordance with the terms of the Notes;
(v) upon conversion of the Notes or exercise of the Warrants; or (vi) upon the
issuance of Common Stock pursuant to an underwritten public offering; or (vii)
upon the issuance of securities to a strategic investor (the "STRATEGIC
INVESTOR"), provided, that, in the case of subclause (vii), such sale satisfies
each of the following conditions: (A) the sale of such securities was approved
by the non-employee members of the Board of Directors of the Corporation and, in
the good faith reasonable business judgment of the non-employee members of the
Board of Directors of the Corporation, such sale of the Corporation's securities
to the Strategic Investor will further the operational business interests of the
Corporation; and (B) the primary purpose of such sale is other than a financing
arrangement.
(c) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Corporation), plus (A) in the case of any
adjustment required by Section 8.4(a) resulting from the issuance of any
Options, the maximum total number of shares of Common Stock issuable upon the
exercise of the Options for which the adjustment is required (including any
Common Stock issuable upon the conversion of Convertible Securities issuable
upon the exercise of such Options), and (B) in the case of any adjustment
required by Section 8.4(a) resulting from the issuance of any Convertible
Securities, the maximum total number of shares of Common Stock issuable upon the
exercise, conversion or exchange of the Convertible Securities for which the
adjustment is required, as of the date of issuance of such Convertible
Securities, if any.
(ii) "MARKET PRICE," as of any date, (A) means the average of
the closing bid prices for the shares of Common Stock as reported on the NASDAQ
National Market ("NASDAQ") by Bloomberg for the five consecutive trading days
immediately preceding such date, or (B) if NASDAQ is not the principal trading
market for the shares of Common Stock, the average of the last reported bid
prices as reported by Bloomberg on the principal trading market for the Common
Stock during the same period, or, if there is no bid price for such period, the
last reported sales price as reported by Bloomberg for such period, or (C) if
market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be the average fair market value as reasonably determined
by an investment banking firm selected by the Corporation and reasonably
acceptable to the Holder, with the costs of the appraisal to be borne by the
Corporation. The manner of determining the Market Price of the Common Stock set
forth
16
in the foregoing definition shall apply with respect to any other security in
respect of which a determination as to market value must be made hereunder.
(iii) "COMMON STOCK," for purposes of this Section 8.4,
includes the Common Stock and any additional class of stock of the Corporation
having no preference as to dividends or distributions on liquidation, provided
that the shares issuable pursuant to this Note shall include only Common Stock
in respect of which this Note is convertible, or shares resulting
om any subdivision or combination of such Common Stock, or in the case of any
Corporate Change referred to in Section 8.2 hereof, the stock or other
securities or property provided for therein.
(iv) "MEASUREMENT DATE" means (A) for purposes of any private
offering of securities under Section 4(2) of the Securities Act of 1933, as
amended, the date that the Corporation enters into legally binding definitive
agreements for the issuance and sale of such securities and (B) for purposes of
any other issuance of securities, the date of issuance thereof.
8.5 PURCHASE RIGHTS. If, at any time after the Issue Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the Holders of the Notes will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if such Holder
had held the number of shares of Common Stock acquirable upon complete
conversion of the Notes (without giving effect to the limitations contained in
Section 3.3) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
8.6 CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS. In the event the
Corporation (i) makes a public announcement that it intends to consolidate or
merge with any other corporation (other than a merger in which the Corporation
is the surviving or continuing corporation and its capital stock is unchanged)
or sell or transfer all or substantially all of the assets of the Corporation or
(ii) any person, group or entity (including the Corporation) publicly announces
a tender offer to purchase 50% or more of the Corporation's Common Stock (or any
other takeover scheme) (the date of the announcement referred to in clause (i)
or (ii) is hereinafter referred to as the "ANNOUNCEMENT DATE"), then the
Conversion Price shall, effective upon the Announcement Date and continuing
through the Major Announcement Termination Date (as defined below), be equal,
for each such date, to the lower of (x) the Conversion Price which would have
been applicable for a conversion occurring on the Announcement Date and (y) the
Conversion Price that would otherwise be in effect. From and after the Major
Announcement Termination Date, the Conversion Price shall be determined without
reference to this Section 8.6. "MAJOR ANNOUNCEMENT TERMINATION DATE" shall mean,
with respect to any proposed transaction or tender offer (or takeover scheme)
for which a public announcement as contemplated by this Section 8.6 has been
made, the date upon which the Corporation (in the case of clause (i) above)
17
or the person, group of entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed transaction or
tender offer (or takeover scheme) which caused this Section 8.6 to become
operative.
8.7 NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Fixed Conversion Price pursuant to this Article VIII, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each Holder of the Notes a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of DSN:104199.3 ny Holder of the Notes, furnish
to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Fixed Conversion Price at the time in effect and (iii)
the number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of any Note.
8.8 OTHER ACTION AFFECTING FIXED CONVERSION PRICE. If the
Corporation takes any action affecting the Common Stock after the date hereof
that would be covered by this Article VIII, but for the manner in which such
action is taken or structured, which would in any way diminish the value of this
Note, then the Fixed Conversion Price shall be adjusted in such manner as the
Board of Directors of the Corporation shall in good faith determine to be
equitable under the circumstances.
ARTICLE IX
MISCELLANEOUS
9.1 FAILURE OR DELAY NOT WAIVER. No failure or delay on the part of
any Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
9.2 NOTICES. Any notices required or permitted to be given under the
terms of this Note shall be delivered personally or by courier or sent by
confirmed telecopy, and shall be effective upon receipt or refusal of receipt,
if delivered personally or by courier or confirmed telecopy, in each case
addressed to a party. The addresses for such communications shall be:
If to the Corporation:
CellPoint Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx Business Part
Chertsey,
Surrey KT 16 ORS
Attention: Xxxx Xxxxxxxxx
Telecopy: 44 1 344 623 090
with a copy to:
Salans Xxxxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxx
18
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy: 000-000-0000
If to the Holder, to the address set forth under such Holder's name on the
signature page to the Securities Purchase Agreement executed by such Holder.
Each party shall provide notice to the other parties of any change in address.
9.3 AMENDMENT PROVISION. This Note and any provision hereof may only
be amended by an instrument in writing signed by the Corporation and all of the
Holders. The term "NOTE" and all references 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.
9.4 ASSIGNABILITY; ALLOCATION OF CAP AMOUNT RESERVED AMOUNT; SELLING
RESTRICTIONS. This Note shall be binding upon the Corporation and its successors
and assigns and shall inure to the benefit of the Holder and its successors and
assigns. This Note may not be transferred without the Corporation's prior
written consent, which consent shall not be unreasonably withheld. The initial
Cap Amount and Reserved Amount shall be allocated pro rata among the Holders of
the Notes based on the aggregate principal amount of Notes issued to each
Holder. In the event a Holder shall sell or otherwise transfer any of such
Holder's Notes, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Each increase to the Reserved
Amount shall be allocated pro rata among the Holders of Notes based on the
outstanding principal amount of Notes held by each Holder at the time of the
increase in the Reserved Amount. Any portion of the Reserved Amount or Cap
Amount which remains allocated to any person or entity which does not hold any
Notes shall be allocated to the remaining Holders of Notes, pro rata based on
the outstanding principal amount of Notes then held by such Holders.
9.5 COST OF COLLECTION. If default is made in the payment of this
Note, the Corporation shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.
9.6 GOVERNING LAW; JURISDICTION. This Note shall be governed by and
construed in accordance with the laws of the State of New York. The Corporation
and the Holder irrevocably consent to the jurisdiction of the United States
federal courts and the state courts located in the State of New York in any suit
or proceeding based on or arising under this Note and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
The Corporation and the Holder irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Corporation further
agrees that service of process upon the Corporation mailed by first class mail
shall be deemed in every respect effective service of process upon the
Corporation in any such suit or proceeding. The Holder further agrees that
service of process upon the Holder mailed by first class mail shall be deemed in
every respect effective service of process upon the Holder in any such suit or
proceeding. Nothing herein shall affect the right of the Corporation or any
Holder to serve process in any other manner permitted by law. The Corporation
and the Holder agree that a final
19
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
9.7 DENOMINATIONS. At the request of Holder, upon surrender of this
Note, the Corporation shall promptly issue new Notes in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $25,000 as Holder shall request.
9.8 LOST OR STOLEN NOTES. Upon receipt by the Corporation from a
Holder of (i) evidence of the loss, theft, destruction or mutilation of any Note
and (ii) (y) in the case of loss, theft or destruction, of indemnity (without
any bond or other security) reasonably satisfactory to the Corporation, or (z)
in the case of mutilation, upon surrender and cancellation of any Note, the
Corporation shall execute and deliver a new Note of like tenor and date.
However, the Corporation shall not be obligated to reissue such lost or stolen
Note if the Holder contemporaneously requests the Corporation to convert such
Note.
9.9 [INTENTIONALLY OMITTED.]
9.10 [Intentionally Omitted.]
9.11 RESTRICTIONS ON SHARES. The shares of Common Stock issuable
upon conversion of this Note may not be sold or transferred unless (i) they
first shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope customary for opinions in such
circumstances) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon conversion
of this Note that have not been so registered and that have not been sold under
an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Note, the Corporation shall remove the
foregoing legend from the certificate and issue to such holder a new certificate
therefor free of any transfer legend, if (i) with such request, the Corporation
shall have received either (A) an opinion of counsel, in form,
20
substance and scope customary for opinions in such circumstances, to the effect
that any such legend may be removed from such certificate, or (B) satisfactory
representations from the Holder that the Holder is eligible to sell such
security under Rule 144 or (ii) a registration statement under the Securities
Act covering the resale of such securities is in effect. Nothing in this Note
shall (i) limit the Corporation's obligation under the Registration Rights
Agreement, or (ii) affect in any way the Holder's obligations to comply with
applicable securities laws upon the resale of the securities referred to herein.
9.12 STATUS AS NOTE HOLDER. Upon submission of a Notice of
Conversion by a Holder of the Notes, (i) the principal amount of the Notes and
the interest thereon covered thereby (other than any portion of the Notes, if
any, which cannot be converted because their conversion could exceed such
Holder's allocated portion of the Reserved Amount or Cap Amount) shall be deemed
converted into shares of Common Stock as of the Conversion Date and (ii) the
Holder's rights as a holder of such Notes shall cease and terminate (but only
with respect to that portion of the Notes covered by such Notice of Conversion),
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Corporation to comply with the terms
of the Notes. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the fifth trading day after
the expiration of the Delivery Period with respect to a conversion of Notes for
any reason, then, if the Holder so elects by so notifying the Corporation within
five trading days after the expiration of such five trading day period, the
conversions shall be void and the portion of the principal amount and interest
thereon subject to such conversion shall be deemed outstanding under the Notes
and the Corporation shall, as soon as practicable, return the Notes to the
Holder. In all cases, the Holder shall retain all of its rights and remedies
(including, without limitation, (i) the right to receive payments pursuant to
Article V to the extent required thereby for such Conversion Default and any
subsequent Conversion Default and (ii) the right to have the Conversion Price
with respect to subsequent conversions determined in accordance with Article V)
for the Corporation's failure to convert the Notes.
9.13 OBLIGATION TO CURE. If the Corporation is prohibited from
issuing shares of Common Stock to a Holder for any reason (other than pursuant
to Section 3.3), the Corporation shall immediately notify the Holders of Notes
of such occurrence and shall take immediate action (including, if necessary,
seeking the approval of its stockholders) to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Corporation or any of its securities on the Corporation's ability to issue
shares of Common Stock.
9.14 REMEDIES CUMULATIVE. The remedies provided in this Note shall
be cumulative and in addition to all other remedies available under this Note,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit a Holder's right to pursue
actual damages for any failure by the Corporation to comply with the terms of
this Note. The Corporation acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holders of the Notes and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the Holders
of the Notes shall be entitled, in addition to all
21
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
9.15 TRADING DAYS. For purposes of this Note, the term "TRADING DAY"
means any day on which NASDAQ or, if the Common Stock is not then traded on
NASDAQ, the principal United States securities exchange or trading market where
the Common Stock is then listed or traded, is open for trading.
9.16 BUSINESS DAY. If any payment or notice is due on a day that is
not a business day (as defined) such payment or notice shall be made on the next
succeeding business day. For purposes of this Note, the term "BUSINESS DAY"
shall mean any day, other than a Saturday or Sunday or other day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Corporation has caused this Convertible Note to be
executed by its duly authorized officer.
CELLPOINT INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Executive Vice President
EXHIBIT 1
---------
NOTICE OF CONVERSION
To: CellPoint Inc.
------------------------------
------------------------------
Attention:
--------------------
Telecopy:
--------------------
The undersigned hereby elects to convert $____________ principal amount of the
Note (the "CONVERSION"), into shares of common stock ("COMMON STOCK") of
CellPoint Inc. (the "CORPORATION") according to the conditions of the
Convertible Note dated ____________, 2000 (the "NOTE"), as of the date written
below. If securities are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. No fee will be charged to the Holder for any conversion, except for
transfer taxes, if any.
The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of Conversion to the account of the undersigned or its nominee
(which is ________________) with DTC through its Deposit Withdrawal Agent
Commission System ("DTC TRANSFER").
In the event of partial exercise, please reissue an appropriate Note(s) for the
principal balance which shall not have been converted.
Check Box if Applicable:
/ / In lieu of receiving the shares of Common Stock issuable pursuant to this
Notice of Conversion by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned or its
nominee (if applicable) physical certificates representing such shares of
Common Stock.
Date of Conversion:
-------------------------------------
Applicable Conversion Price:
----------------------------
Amount of Accrued and Unpaid Interest on the Principal
Amount ("Unpaid Interest") to be converted,
if any:
-------------------------------------------------
Amount of Unpaid Interest to be paid in cash, if any:
Default Amount to be converted, if any:
-----------------
Number of Shares of
Common Stock to be Issued:
------------------------------
Signature:
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Name:
---------------------------------------------------
Address:
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