EXHIBIT 4.7
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT
PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF. NEITHER THIS NOTE NOR THE SECURITIES REPRESENTED
HEREBY MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC
LIMITED CIRCUMSTANCES, AN OPINION OF COUNSEL FOR THE LENDER, REASONABLY
ACCEPTABLE TO THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE
NOT REQUIRED.
DELTA MUTUAL, INC.
AMENDED AND RESTATED 6% CONVERTIBLE PROMISSORY NOTE
$266,000 April 5, 2007
Sellersville, Pennsylvania
FOR VALUE RECEIVED, DELTA MUTUAL INC., a Delaware corporation (the
"Company"), with offices at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX
00000, promises to pay to Congregation Xxxxxx Xxxxxx, a New York
corporation, (the "Lender"), of 000 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000 in
lawful money of the United States of America, the principal sum of Two
Hundred Sixty Six Thousand Dollars ($266,000), together with interest from
the date of this Note on the unpaid principal balance at a rate equal to
six percent (6.0%) per annum, computed on the basis of a year of 360 days
and compounded annually on the last day of the calendar year. All unpaid
principal, together with any then unpaid and accrued interest and other
amounts payable hereunder, shall be due and payable at any time after the
earlier of (i) the Maturity Date (as defined below), or (ii) when, upon or
after the occurrence of an Event of Default (as defined below), such
amounts are declared due and payable by the Lender or made automatically
due and payable in accordance with the terms hereof.
This Amended and Restated Note replaces and supercedes in its entirety
that certain 6% Convertible Promissory Note previously issued by the
Company to Lender in the principal amount of $266,000.
The following is a statement of the rights of the Lender and the
conditions to which this Note is subject, and to which the Lender, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following capitalized terms have the
following meanings:
1.1 "Common Stock" shall mean the common stock, par value $.0001 per
share, of Delta Mutual, Inc., a Delaware corporation.
1.2 "Company" includes the corporation initially executing this Note and
any Person which shall succeed to or assume the obligations of the
Company under this Note.
1.3 "Event of Default" has the meaning given in Section 6 hereof.
1.4 "Lender" shall mean the Person specified in the introductory
paragraph of this Note or any Person who shall at the time be the
registered holder of this Note.
1.5 "Maturity Date" shall mean April 5, 2008.
1.6 "Obligations" shall mean all obligations, owed by the Company to the
Lender, now existing or hereafter arising under or pursuant to the
terms of this Note. 1.7 "Person" shall mean and include an
individual, a partnership, a corporation (including a business
trust), a joint stock the Company, a limited liability the Company,
an unincorporated association, a joint venture or other entity or a
governmental authority.
2. Interest. All accrued and unpaid interest on this Note shall be due and
payable on the Maturity Date.
3. Seniority. This Note shall be senior to all general obligations of the
Company including, trade payables and other obligations incurred in the ordinary
course of business.
4. Repayment at the Company's Option. At any time after the date hereof and
prior to the Maturity Date, the Company may repay this Note, including all
interest accrued on this Note, without penalty or premium, in whole or in part;
provided that any such repayment will be applied first to the payment of unpaid
interest accrued on this Note and second, to the payment of principal of this
Note, by providing thirty (30) days prior written notice to the Lender.
Notwithstanding the foregoing, prior to the expiration of the thirty-day notice
period, the Lender shall have the right to convert this Note in accordance
herewith prior to any such repayment, as set forth in Section 8.1 hereof.
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5. Representations and Warranties of The Lender. The Lender represents and
warrants to the Company upon the acquisition of the Note as follows:
5.1 Binding Obligation. The Lender has full legal capacity, power and
authority to execute and deliver this Note and to perform its
obligations hereunder. This Note is a valid and binding obligation
of the Lender, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors'
rights generally and general principles of equity.
5.2 Securities Law Compliance. The Lender has been advised that this
Note has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities laws and,
therefore, cannot be resold unless it is registered under the
Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available. The
Lender is aware that the Company is under no obligation to effect
any such registration with respect to this Note or to file for or
comply with any exemption from registration. The Lender is
purchasing this Note for its own account for investment, not as a
nominee or agent, and not with a view to, or for resale in
connection with, the distribution thereof. The Lender has such
knowledge and experience in financial and business matters that the
Lender is capable of evaluating the merits and risks of such
investment, is able to incur a complete loss of such investment and
is able to bear the economic risk of such investment for an
indefinite period of time.
6. Events of Default. The occurrence of any of the following shall constitute an
"Event of Default" under this Note:
6.1 Failure to Comply With Covenants. The Company shall have failed to
perform, keep, or observe any other material term, provision,
condition, covenant, or agreement contained in this Note and has
failed to cure such default within fifteen (15) business days after
the Company's receipt of written notice from the Lender of such
default;
6.2 Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee,
liquidator or custodian of itself or of all or a substantial part of
its property, (ii) be unable, or admit in writing its inability, to
pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be
dissolved or liquidated, (v) become insolvent (as such term may be
defined or interpreted under any applicable statute), (vi) commence
a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official
in an involuntary case or other proceeding commenced against it, or
(vii) take any action for the purpose of effecting any of the
foregoing; or
6.3 Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of
the Company or of all or a substantial part of the property thereof,
or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to the Company or the
debts thereof under any bankruptcy, insolvency or other similar law
now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or
discharged within sixty (60) days of commencement.
7. Rights of The Lender upon Default. Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 6.2 and
6.3) and at any time thereafter during the continuance of such Event of Default,
the Lender may, by written notice to the Company, declare all outstanding
Obligations payable by the Company hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived. Upon the occurrence or existence of any Event
of Default described in Sections 6.2 and 6.3, immediately and without notice,
all outstanding Obligations payable by the Company hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived. In addition
to the foregoing remedies, upon the occurrence or existence of any Event of
Default, the Lender may exercise any other right, power or remedy otherwise
permitted to it by law, either by suit in equity or by action at law, or both.
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8. Conversion.
8.1 Optional Conversion. At any time after the date hereof and prior to the
Maturity Date, the Lender may convert all or any portion of the
outstanding principal balance of this Note, and, unless paid in cash by or
on behalf of the Company, all accrued and unpaid interest thereon, into
fully paid and nonassessable shares of Common Stock. The number of shares
of Common Stock into which this Note may be converted (the "Conversion
Shares") shall be determined by dividing the aggregate principal amount,
and, if applicable, accrued and unpaid interest, of the Note by the
Conversion Price (as defined below) in effect at the time of such
conversion. The "Conversion Price" shall be equal to $0.05 per share
(subject to adjustment for stock splits, combinations and other similar
transactions, and as set forth below in Section 8.4).
8.2 Fractional Shares; Effect of Conversion. No fractional shares shall be
issued upon conversion of this Note. Upon conversion of this Note in full,
the Company shall be forever released from all its obligations and
liabilities under this Note.
8.3 Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of this
Note such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of the Note; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the entire outstanding principal
amount and, if applicable, accrued and unpaid interest, of the Note,
without limitation of such other remedies as shall be available to the
Lender of this Note, the Company will use its best efforts to take such
corporate action as may, in the opinion of counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purposes.
8.4 Adjustment to Conversion Price. In the event that the Company shall at any
time subdivide the outstanding securities into which this Note shall be
convertible, or shall issue a stock dividend on the securities into which
this Note shall be convertible, the number of Conversion Shares
immediately prior to such subdivision or to the issuance of such stock
dividend shall be proportionately increased, and the Conversion Price
shall be proportionately decreased, and in the event that the Company
shall at any time combine the outstanding securities into which this Note
shall be convertible, the number of Conversion Shares immediately prior to
such combination shall be proportionately decreased, and the Conversion
Price shall be proportionately increased, effective at the close of
business on the date of such subdivision, stock dividend or combination,
as the case may be. The foregoing notwithstanding, for so long as any
portion of the principal amount, and, if applicable, accrued and unpaid
interest, of this Note is outstanding, if the Company issues shares of its
Common Stock or other securities convertible into Common Stock, at a price
per share below Five Cents ($0.05), then the Conversion Price shall be
adjusted to the price per share of the shares of Common Stock or
convertible securities so issued by the Company.
9. Covenants of The Company. The Company will, until the earlier to occur of the
conversion or repayment in full of this Note, have authorized a sufficient
number of shares of each class or series of capital stock into which this Note
is convertible pursuant to Section 8 hereof and shall reserve for issuance upon
conversion hereof a sufficient number of shares thereof.
10. Registration Rights. If at any time, the Company proposes to register any of
its securities under the Securities Act (the "Act"), whether or not for its own
account (other than by a registration statement on Form S-8 or Form S-4), it
shall give written notice to Lender of its intent to file a registration
statement and include in such registration statement that number of Conversion
Shares held by Lender or that number of shares requested by Lender to be
included in such registration statement upon conversion, subject to the
limitations set forth in this Section 10 ("Piggyback Registration Rights").
10.1 Underwritten Public Offerings. If the Company elects to register its
securities by or through an underwriter, the Lender may elect to sell its
Conversion Shares on the same terms and conditions as apply to other
selling shareholders or may elect not to have its Conversion Shares
included in such registration. The Company shall pay all expenses in
connection with the registration of Xxxxxx's Conversion Shares pursuant to
the Piggyback Registration Rights.
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10.2 Priority in Piggyback Registration. The Company shall not be required to
include any Conversion Shares to the extent the managing underwriter
reasonably believes and advises Lender that inclusion of such shares would
materially adversely affect such offering; provided , however, that any
such reduction or elimination shall be pro rata among all other holders of
Common Stock exercising any registration rights in proportion to the
respective number of shares of Common Stock requested to be registered, if
any.
11. Successors and Assigns. Subject to the restrictions on transfer described in
Sections 13 and 14 below, the rights and obligations of the Company and the
Lender of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
12. Waiver and Amendment. Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and the Lender.
13. Transfer of this Note or Securities Issuable on Conversion Hereof. This Note
may not be sold, assigned or transferred by the Lender. With respect to any sale
or other disposition of the securities into which this Note may be converted,
the Lender will give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of the Lender's
counsel, or other evidence if reasonably satisfactory to the Company, to the
effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect).
Upon receiving such written notice and reasonably satisfactory opinion, if so
requested, or other evidence, the Company, as promptly as practicable, shall
notify the Lender that the Lender may sell or otherwise dispose of such
securities, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this Section 12 that the
opinion of counsel for the Lender, or other evidence, is not reasonably
satisfactory to the Company, the Company shall so notify the Lender promptly
after such determination has been made. Each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the
Securities Act, unless in the opinion of counsel for the Company such legend is
not required in order to ensure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions. Subject to the foregoing, transfers of this Note or the
securities underlying this Note shall be recorded in registration books
maintained for such purpose by or on behalf of the Company. Prior to
presentation of this Note or such securities for transfer, the Company shall
treat the registered Lender hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever.
14. Assignment by The Company. Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company without the prior written consent
of the Lender.
15. Notices. All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall in writing and faxed,
mailed or delivered to each party at the respective addresses or facsimile
numbers of the parties. All such notices and communications shall be effective
(a) when sent by Federal Express or other overnight service of recognized
standing, on the business day following the deposit with such service; (b) when
mailed, by mail, first class postage prepaid and addressed as aforesaid through
the United States Postal Service, upon receipt; (c) when delivered by hand, upon
delivery; and (d) when faxed, upon confirmation of receipt.
16. Waivers. The Company hereby waives notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor and all other notices
or demands relative to this instrument.
17. Governing Law. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania, without regard to the conflicts of law
provisions of the Commonwealth of Pennsylvania, or of any other state.
IN WITNESS WHEREOF, The Company has caused this Amended and Restated Note
to be issued as of April 30, 2007.
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DELTA MUTUAL, INC.
a Delaware corporation
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President & CEO
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