Exhibit 10.20.2
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO INYX, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED REVOLVING NOTE
FOR VALUE RECEIVED, INYX, INC., a Nevada corporation (the "Borrower"),
promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services
Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman,
Cayman Islands, Fax: 000-000-0000 (the "Holder") or its registered assigns, on
order, the sum of up to Two Million Five Hundred Thousand United States Dollars
(USD$2,500,00) without duplication of any amounts owing by Borrower to Holder
under the Minimum Borrowing Notes (as defined in the Security Agreement referred
to below), or, if different, the aggregate principal amount of all "Loans" (as
such term is defined in the Security Agreement referred to below), together with
any accrued and unpaid interest hereon, on December 30, 2006 (the "Maturity
Date").
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement between Borrower and
the Holder dated as of December 30, 2003 (as amended, modified and supplemented
from time to time, the "Security Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & PREPAYMENTS
1.1. Interest Rate and Payments. Subject to Sections 5.3 and 6.7
hereof, interest payable on this Note shall accrue at a rate per annum equal to
the "prime rate" published in The Wall Street Journal from time to time, plus
three percent (3 %) (the "Contract Rate"). The Prime Rate shall be increased or
decreased as the case may be for each increase or decrease in the Prime Rate in
an amount equal to such increase or decrease in the Prime Rate; each change to
be effective as of the day of the change in such rate in accordance with the
terms of the Security Agreement. Subject to the immediately following sentence,
the Contract Rate shall not be less than seven percent (7.00%). The Contract
Rate shall be adjusted as follows: if (i) the Borrower shall have registered the
shares of the Borrower's common stock underlying the conversion of all currently
issued and outstanding Minimum Borrowing Notes and that certain warrant issued
to Holder of even date herewith on a registration statement declared effective
by the Securities Exchange Commission, and (ii) the volume weighted average
price of the Common Stock as reported by Bloomberg, L.P. on the principal market
for any of the ten (10) trading days immediately preceding an Interest Payment
Date (defined below) exceeds the then applicable Fixed Conversion Price by
twenty five percent (25%), the Contract Rate for the succeeding calendar month
shall automatically be reduced by twenty five basis points (25 b.p.) for such
period. Interest shall be payable monthly in arrears commencing on February 2,
2004 and on the first day of each consecutive calendar month thereafter, (each,
an "Interest Payment Date").
1.2 Allocation of Principal to Minimum Borrowing Note. In the event
that the amount due and payable hereunder should equal or exceed $1,500,000, to
the extent that the outstanding balance on Minimum Borrowing Note shall be less
than $1,000,000 (the difference of $1,000,000 less the actual balance of the
Minimum Borrowing Note, the "Available Minimum Borrowing"), such portion of the
balance hereof as shall equal the Available Minimum Borrowing shall be deemed to
be simultaneously extinguished on the Revolving Note and transferred to, and
evidenced by, the Minimum Borrowing Note (e.g., the Available Minimum Borrowing
shall be $0).
ARTICLE II
HOLDER'S CONVERSION RIGHTS
2.1. Optional Conversion. Subject to the terms of this Article II, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or thereafter during an Event of Default (as defined in Article
IV), and, subject to the limitations set forth in Section 2.2 hereof, to convert
all or any portion of the outstanding Principal Amount and/or accrued interest
and fees due and payable into fully paid and nonassessable shares of the Common
Stock at the Fixed Conversion Price. For purposes hereof, subject to Section 3.5
hereof, the "Fixed Conversion Price" means $ 1.47 (103% of the average of the
closing price of the Common Stock for the five (5) trading days immediately
prior to the date hereof.) The shares of Common Stock to be issued upon such
conversion are herein referred to as the "Conversion Shares."
2.2. Conversion Limitation. Notwithstanding anything contained herein
to the contrary, the Holder shall not be entitled to convert pursuant to the
terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between the number of shares
of Common Stock beneficially owned by such Holder or issuable upon exercise of
warrants held by such Holder and 4.99% of the outstanding shares of Common Stock
of the Borrower. For the purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13d-3 thereunder. The Conversion Shares limitation
described in this Section 2.2 shall automatically become null and void without
any notice to Borrower upon the occurrence and during the continuance beyond any
applicable grace period of an Event of Default, or upon 75 days prior notice to
the Borrower.
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2.3. Mechanics of Xxxxxx's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion
("Notice of Conversion") to the Borrower and such Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees that are being converted. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the Holder
shall make the appropriate reduction to the Principal Amount, accrued interest
and fees as entered in its records and shall provide written notice thereof to
the Borrower within two (2) business days after the Conversion Date. Each date
on which a Notice of Conversion is delivered or telecopied to the Borrower in
accordance with the provisions hereof shall be deemed a Conversion Date (the
"Conversion Date"). A form of Notice of Conversion to be employed by the Holder
is annexed hereto as Exhibit A. Pursuant to the terms of the Notice of
Conversion, the Borrower will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the date of
the delivery to Borrower of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates representing the Conversion Shares
to the Holder by crediting the account of the Holder's designated broker with
the Depository Trust Corporation ("DTC") through its Deposit Withdrawal Agent
Commission ("DWAC") system within three (3) business days after receipt by the
Borrower of the Notice of Conversion (the "Delivery Date"). In the case of the
exercise of the conversion rights set forth herein the conversion privilege
shall be deemed to have been exercised and the Conversion Shares issuable upon
such conversion shall be deemed to have been issued upon the date of receipt by
the Borrower of the Notice of Conversion. The Holder shall be treated for all
purposes as the record holder of such Common Stock, unless the Holder provides
the Borrower written instructions to the contrary.
2.4. Late Payments. The Borrower understands that a delay in the
delivery of the shares of Common Stock in the form required pursuant to this
Article beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of such shares in the form required
pursuant to this Article III upon conversion of the Note, in the amount equal to
$500 per business day after the Delivery Date. The Borrower shall pay any
payments incurred under this Section in immediately available funds upon demand.
2.5. Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to Section 2.1 shall be subject to adjustment from time to time upon
the happening of certain events while this conversion right remains outstanding,
as follows:
A. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock immediately prior to such reclassification or other
change.
B. Stock Splits, Combinations and Dividends. If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
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Stock, the Fixed Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.
C. Share Issuances. Subject to the provisions of this Section 3.6, if
the Borrower shall at any time prior to the conversion or repayment in full of
the Principal Amount issue any shares of Common Stock to a person other than the
Holder (except (i) pursuant to Subsections A or B above; (ii) pursuant to
options, warrants, or other obligations to issue shares outstanding on the date
hereof as disclosed to Holder in writing; or (iii) pursuant to options that may
be issued under any employee incentive stock option and/or any qualified stock
option plan adopted by the Borrower) for a consideration per share (the "Offer
Price") less than the Fixed Conversion Price in effect at the time of such
issuance, then the Fixed Conversion Price shall be immediately reset pursuant to
the formula below. For purposes hereof, the issuance of any security of the
Borrower convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price only upon the conversion,
exercise or exchange of such securities.
If the Corporation issues any additional shares pursuant to Section 3.5
above then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:
----------------------------------------
A + B
----------------------------------------
(A + B) + [((C - D) x B) / C]
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A = Actual shares outstanding prior to such offering
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
D. Computation of Consideration. For purposes of any computation
respecting consideration received pursuant to Subsection C above, the following
shall apply:
(a) in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for any commissions, discounts or other expenses incurred
by the Borrower for any underwriting of the issue or otherwise in connection
therewith;
(b) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
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cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of the Borrower (irrespective of the accounting
treatment thereof); and
(c) Upon any such exercise, the aggregate consideration received for
such securities shall be deemed to be the consideration received by the Borrower
for the issuance of such securities plus the additional minimum consideration,
if any, to be received by the Borrower upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as provided
in clauses (a) and (b) of this Subsection (D)). 2.6. Reservation of Shares.
During the period the conversion right exists, the Borrower will reserve from
its authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of Common Stock upon the full conversion of this Note.
The Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. The Borrower agrees that its issuance of
this Note shall constitute full authority to its officers, agents, and transfer
agents who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the conversion of this Note.
ARTICLE III
EVENTS OF DEFAULT
The occurrence of any of the following events is an Event of Default
("Event of Default"):
3.1. Failure to Pay Principal, Interest or other Fees. The Borrower
fails to pay when due any installment of principal, interest or other fees
hereon or on any other Note issued pursuant to the Security Agreement, when due
in accordance with the terms of such Note.
3.2. Breach of Covenant. The Borrower breaches any covenant or other
term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of thirty (30) days after the occurrence
thereof.
3.3. Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, or the Security
Agreement, or in any Ancillary Agreement shall be materially false or
misleading.
3.4. Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for 5 consecutive days or 5
days during a period of 10 consecutive days, excluding in all cases a suspension
of all trading on a Principal Market, provided that the Borrower shall not have
been able to cure such trading suspension within 30 days of the notice thereof
or list the Common Stock on another Principal Market within 60 days of such
notice. The "Principal Market" for the Common Stock shall include the NASD OTC
Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American
Stock Exchange, or New York Stock Exchange (whichever of the foregoing is at the
time the principal trading exchange or market for the Common Stock), or any
securities exchange or other securities market on which the Common Stock is then
being listed or traded.
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3.5. Default Under Related Agreement. The occurrence of an Event of
Default under and as defined in the Security Agreement.
3.6 Failure to Deliver Common Stock or Replacement Note. The Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 9 of the Security Agreement if such failure to
timely deliver Common Stock shall not be cured within two (2) business days, or
if required, the Borrower is required to issue to Holder a replacement Note, and
the Borrower's failure to deliver a replacement Note is not cured within seven
(7) business days.
3.7 Payment Grace Period. The Borrower shall have a three (3) business
day grace period to pay any monetary amounts due under this Note or the Security
Agreement or any Related Document, after which grace period a default interest
rate of five percent (5%) per annum above the then applicable interest rate
hereunder shall apply to the monetary amounts due.
ARTICLE IV
DEFAULT PAYMENTS
4.1. Default Payment. If an Event of Default occurs, the Holder, at its
option, may elect, in addition to all rights and remedies of Holder under the
Security Agreement and all obligations of Borrower under the Security Agreement,
to require the Borrower to make a Default Payment ("Default Payment"). The
Default Payment shall be the outstanding principal amount of the Note, plus
accrued but unpaid interest, all other fees then remaining unpaid, and all other
amounts payable hereunder.
4.2. Default Payment Date and Default Notice Period. The Default
Payment shall be due and payable on the fifth business day after an Event of
Default as defined in Article III ("Default Payment Date") has occurred and is
continuing beyond any applicable grace period. The period between date upon
which of an Event of Default has occurred and is continuing beyond any
applicable grace period and the Default Payment Date shall be the "Default
Period." If during the Default Period, the Borrower cures the Event of Default,
the Event of Default will no longer exist and any additional rights the Holder
had triggered by the occurrence and continuance of an Event of Default will no
longer exist. If the Event of Default is not cured during the Default Notice
Period, all amounts payable hereunder shall be due and payable on the Default
Payment Date, all without further demand, presentment or notice, or grace
period, all of which hereby are expressly waived.
4.3. Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, interest on this Note shall automatically be
increased by five percent (5%) per annum, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest from the date of
such Event of Default at such interest rate applicable to such Obligations until
such Event of Default is cured or waived.
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4.4. Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder hereof 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. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2 Tax. Gross Up. The Borrower shall make all payments to be made by
it under this Note without any Tax Deduction unless a Tax Deduction is required
by law. The Borrower shall promptly upon becoming aware that it must make a Tax
Deduction (or that there is any change in the rate or the basis of a Tax
Deduction) notify the Holder accordingly. If a Tax Deduction is required by law
to be made by the Borrower the amount of the payment due from the Borrower under
this Note shall be increased to an amount which (after making any Tax Deduction)
leaves an amount equal to the payment which would have been due under this Note
if no Tax Deduction had been required. If the Borrower is required to make a Tax
Deduction, it shall make that Tax Deduction and any payment required in
connection with that Tax Deduction within the time allowed and in the minimum
amount required by law. Within thirty days of making either a Tax Deduction or
any payment required in connection with that Tax Deduction, the Borrower shall
deliver to the Holder evidence reasonably satisfactory to the Holder that the
Tax Deduction has been made or (as applicable) any appropriate payment paid to
the relevant taxing authority.
5.3 Tax Indemnity. The Borrower shall (within three business days of
demand by the Holder) pay to the Borrower an amount equal to the loss, liability
or cost which the Holder determines will be or has been (directly or indirectly)
suffered for or on account of any Tax by the Holder in respect of this Note,
except:
(i) for any Tax assessed on the Holder under the law of (a) the
jurisdiction in which it is incorporated or any United States
federal income tax to which it may be subject, or (b) the
jurisdiction (or jurisdictions) in which the Holder is treated
as resident for tax purposes; or (c) (in respect of amounts
received or receivable in this jurisdiction) the jurisdiction
in which any branch office of the Holder is located; if that
Tax is imposed on or calculated by reference to the net income
received or receivable (but not any sum deemed to be received
or receivable) by the Holder; and
(ii) to the extent a loss, liability or cost is compensated for by
an increased payment under Section 5.2; and
(iii) if the Borrower makes any Tax Payment and the Holder
determines that:
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(X) a Tax Credit is attributable either to an increased
payment of which that Tax Payment forms part, or to that Tax
Payment; and (Y) the Holder has obtained, utilized and
retained that Tax Credit, and (Z) the Holder shall pay an
amount to the Borrower which the Holder determines will leave
it (after that payment) in the same after-Tax position as it
would have been in had the Tax Payment not been required to be
made by the Borrower.
For the purposes of Sections 5.2 and 5.3 : "Tax" means any tax, levy,
impost, duty or other charge or withholding of a similar nature (including any
penalty or interest payable in connection with any failure to pay or any delay
in paying any of the same); (ii)"Tax Deduction" means any deduction or
withholding for or on account of any Tax; (iii)"Tax Payment" means an increase
in a payment made by the Borrower in accordance with Section 5.2 and/or Section
5.3 hereof; and (iv)"Tax Credit" means a credit against, relief or remission
for, or payment of, any Tax.
5.4 Notices. Any notice herein required or permitted to be given shall
be in writing and provided in accordance with the terms of the Security
Agreement.
5.5 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as it may be amended or supplemented.
5.6 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Security Agreement.
5.7 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
5.8 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
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from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court order in favor of Xxxxxx.
5.9 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
5.10 Security Interest. The Holder of this Note has been granted a
security interest in certain assets of the Borrower more fully described in a
Security Agreement dated as of December 30, 2003.
5.11 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Secured Convertible
Revolving Note to be signed in its name effective as of this 30 day of December,
2003.
INYX, INC.
By: /s/ Xxxx Xxxxxxx
---------------------------
WITNESS: Xxxx Xxxxxxx, Chairman
---------------------------
INYX PHARMA, LTD.
By: /s/ Xxxxxx Xxxxxxx
---------------------------
WITNESS: Xxxxxx Xxxxxxx, President
---------------------------
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NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Secured Convertible Revolving Note
issued by Inyx, Inc. on December 30, 2003 into Shares of Common Stock of Inyx,
Inc. (the "Borrower") according to the conditions set forth in such Note, as of
the date written below.
Date of Conversion: _____________________________________________________
Conversion Price: _____________________________________________________
Shares To Be Delivered: _____________________________________________________
Signature: _____________________________________________________
Print Name: _____________________________________________________
Address: _____________________________________________________
Holder DWAC instructions _____________________________________________________
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