, 1996 Note No.___________
Go-Video, Inc.
10% CONVERTIBLE SUBORDINATED NOTE
$250,000 Principal Amount
Registered Owner:
For value received, Go-Video, Inc., a Delaware corporation (the
"Company"), grants the following rights to the registered owner of this Note.
1. Interest. The Company promises to pay interest on the principal
amount of this Note at the rate per annum shown above. Interest will accrue on
the Note quarterly from the date the Note is issued (the "Note Issuance Date")
and shall be calculated on the basis of the actual number of days in the
interest accrual period for the Note and a 365-day year. The Company will pay
the interest on each anniversary date following the issuance of the Note (the
"Interest Payment Date"), provided that the Note has not as of such date been
converted into shares of Common Stock of the Company, as provided below. If the
Note is converted prior to the Interest Payment Date, interest accrued but
unpaid will be due and payable on the Conversion Date.
2. Method of Payment. The Company will pay interest on the Note to the
persons who are registered holders of the Note at the close of business 15 days
preceding the Interest Payment Date. The Company will pay accrued interest in
the form of shares of the Company's Common Stock. The number of shares of Common
Stock to be issued for payment of accrued interest shall be based upon the
average closing price of the Common Stock for the twenty trading days
immediately preceding such anniversary date. In the event that fractional shares
would be issuable, the Company shall pay the fractional amount with cash.
Interest shall accrue on a quarterly basis.
3. Registrar and Agent. The Company shall act as Registrar, Paying
Agent, Conversion Agent, and agent for service of notices and demands. The
Company may change the Registrar or any agent without notice. The address of the
Company is 0000 Xxxx XxXxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxx, 00000, attn: Chief
Financial Officer.
4. Limitations. The Note is a general unsecured obligation of the
Company limited to $250,000 principal amount. The Note does not impose
limitations on the ability of the Company to, among other things, make payments
in respect to its Common or Preferred Stock, merge or consolidate with any other
Person and sell, lease, transfer or otherwise dispose of its products or assets.
5. Mandatory Forced Conversion of Note into Common Stock of the
Company. The Company may, at its option, following the third anniversary of the
Note Issuance Date, require the conversion of the Note into shares of its Common
Stock in accordance with the conversion provisions stated below.
6. Notice of Redemption. Notice of redemption will be mailed at least
ten (10) days prior to issuance by the Company of shares of Common Stock at the
then applicable conversion rate. On and after the redemption date, interest
ceases to accrue on the Note or portions thereof.
7. Conversion. The Registered Owner may convert the Note into shares of
Common Stock of the Company at any time after the Note Issuance Date and before
the close of business on any date fixed for redemption, provided that the holder
notifies the Company with written notice via U.S. Mail, courier, or confirmed
facsimile transmission of the intention to convert. The Note is convertible into
200,000 shares of the Company's Common Stock at $1.25 per share, or in such
greater number as may be provided below. The Company may call for mandatory
conversion at any time after the third anniversary of the issuance of the Notes
by providing written notice of its intention to call for conversion to the
holders ten (10) business days prior to the Conversion Date.
To convert the Note, the Registered Owner must (i) complete and sign the
conversion notice, (ii) surrender the Note to the Conversion Agent, (iii)
furnish appropriate endorsements and transfer documents if required by the
Registrar or Conversion Agent, and (iv) pay any transfer or similar tax if
required. Partial conversions are not permitted.
If the Company is a party to a consolidation or merger or a transfer or lease of
all or substantially all of its assets, the right to convert the Note into
shares of Common Stock may be changed into a right to convert it into
securities, cash, or other assets of the Company or other Person.
8. Conversion Price. Upon conversion of the Note, the Conversion Price
shall be the lesser of the Stated Conversion Price of $1.25 per share or the
Adjusted Conversion Price. The Adjusted Conversion Price shall be calculated as
the greater of (i) seventy percent (70%) of the closing price for the Common
Stock as reported on the American Stock Exchange on the trading day preceding
receipt by the Company of Notice from the Holder of the intention to exercise
its conversion privilege; (ii) the average closing price of the Common Stock for
the ten (10) trading days immediately preceding receipt by the Company of Notice
from the holder of the intention to exercise its conversion privilege; or (iii)
$0.50 per share. The minimum and maximum number of shares of Common Stock per
Note that will be issued upon conversion is 200,000 and 500,000, respectively.
The Note must be converted in full.
9. Subordination. This Note is subordinated to all other indebtedness,
present or future, of the Company. To the extent and in the manner provided in
the Note, other indebtedness must be paid before any payment may be made to any
holders of Notes. Any holder by accepting this Note agrees to the subordination
and authorizes any trustee or other agent to give it effect. The Note has
liquidation priority over Common and Preferred Stockholders.
In addition to all other rights of other non-subordinated indebtedness, such
indebtedness shall continue to be non-subordinated indebtedness and entitled to
the benefits of the subordination provisions irrespective of any amendment,
modification, or waiver of any term of any instrument relating to
non-subordinated indebtedness or extension or renewal of non-subordinated
indebtedness.
10. Persons Deemed Owners. The Registered Owner of a Note may be
treated as its owner for all purposes.
11. Amendment and Waiver. The terms of the Note may not be amended in a
manner that would be adverse to the rights of the Note holder without the
written consent of the Registered Owner. The Company may amend the terms of the
Note to, among other things, cure any ambiguity, defect, or inconsistency or
make any other change that does not adversely affect the rights of the Note
holder.
12. Successors. When a successor assumes all of the obligations of its
predecessor under the Note, the predecessor will be released from those
obligations.
13. No Recourse Against Others. No stockholder, director, officer,
affiliate, or incorporator, as such, past, present, and future, of the Company
or any successor corporation shall have any liability for any obligation of the
Company under the Note or for any claim based on, in respect of, or by reason
of, such obligations or the creation. Each holder of a Note by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Note.
14. Authentication. This Note shall not be valid unless the Chief
Executive Officer and Corporate Secretary have signed the Note and caused to be
placed on the Note the Corporate Seal.
15. Transfer. This Note may be sold, transferred, or pledged only if
the Company has been provided with an option of counsel satisfactory to the
Company that such sale, transfer, or pledge is permitted by exemptions under
federal and applicable state securities laws. Upon such transfer, the Registered
Owner shall be listed on the Note transfer records of the Company.
IN WITNESS WHEREOF, Go-Video, Inc. has signed this Note by its duly
authorized officers effective as of the ______ day of , 1996.
Go-Video, Inc.
By: ________________________________________________
Xxxxx Xxxxxxx
Chairman, Chief Executive Officer, and President
ATTEST:
By: ______________________________________
Xxxxxxx Xxxxx
Vice President, Chief Financial Officer,
Secretary and Treasurer
Note Conversion Form
To: Go-Video, Inc.
Attn. Chief Financial Officer
The undersigned hereby requests that this Note be converted into shares
of Common Stock as provided for in the terms of the Subscription Agreement and
that a certificate for the appropriate number of shares of Common Stock be
issued in the name of the undersigned and delivered to the at the address
specified below.
Date: _____________________________
By: _____________________________
Printed Name: ______________________
Title: _____________________________
Address: ___________________________
___________________________
___________________________
Signature Guaranteed By:
