Exhibit 10(z)(ii)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW
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AND NEITHER THIS NOTE NOR ANY INTEREST THEREIN MAY BE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH LAWS AND RULES
AND REGULATIONS THEREUNDER.
COVER-ALL TECHNOLOGIES, INC.
CONVERTIBLE NOTE
New York, New York
$250,000.00 March 14, 1997
FOR VALUE RECEIVED, Cover-All Technologies, Inc.,
a Delaware corporation (the "Company"), hereby promises to
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pay to Atlantic Employers Insurance Company, a New Jersey
corporation, or its registered assigns (the "Holder"), the
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principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00), together with interest thereon from the date
hereof (computed on the basis of a 360-day year and actual
days elapsed) at the rate of 12.5% per annum (but in no
event to exceed the maximum rate permitted under applicable
provisions of law). Subject to the prior automatic
conversion of this Note pursuant to Section 2 hereof, the
principal of and accrued interest on this Note shall be due
and payable on the earlier to occur of (i) the closing of a
"permanent financing" (as defined in Section 5.6 hereof) by
the Company, and (ii) when declared due and payable by the
Holder, or when this Note automatically becomes due and
payable, upon the occurrence of an Event of Default (as
defined below); provided, that the Holder shall, in either
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event, have the option to convert this Note pursuant to
Section 2.2 hereof in lieu of the repayment by the Company
of the principal and accrued interest due hereunder. The
date on which this Note becomes due and payable is referred
to herein as the "Maturity Date." The payment of principal
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and interest shall be made in such coin or currency of the
United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
Principal and interest on this Note shall be paid by wire
transfer in accordance with the written instructions of the
Holder or, in the absence of such instructions, by check
mailed to the Holder's address set forth in the Purchase
Agreement (as defined below). This Note may be prepaid at
any time, in whole or in part, without premium or penalty,
and the amount of the prepayment shall be applied first to
accrued interest and the remainder to the unpaid principal
balance hereof. This Note is issued pursuant to that
certain Convertible Note Purchase Agreement between the
Company, the Holder and certain other purchasers of similar
notes, dated as of the date hereof (the "Purchase
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Agreement"), and the Holder of this Note is entitled to
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certain rights and privileges set forth in the Purchase
Agreement.
1. EVENTS OF DEFAULT.
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1.1 If any of the following events specified
in this Section 1 shall occur (herein individually referred
to as an "Event of Default"), then (i) with respect to the
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Events of Default set forth in clauses (i), (ii), (iii),
(iv) and (v), the Holder of this Note may, so long as such
condition exists, declare the entire principal and unpaid
accrued interest hereunder to be immediately due and
payable, by notice in writing to the Company, and (ii) with
respect to the Events of Default set forth in clauses (vi)
and (vii), this Note shall automatically become immediately
due and payable:
(i) default in the payment of the
principal of or accrued interest on this Note when
due and payable, whether on the Maturity Date, by
acceleration or otherwise;
(ii) any representation or warranty made
by the Company in the Purchase Agreement shall
have been incorrect in any material respect when
made;
(iii) the Company shall default in the
performance or observance of any term, covenant,
condition or agreement contained in this Note
(other than the payment of principal or interest
hereunder) or in the Purchase Agreement and, if
capable of being remedied, such default shall
continue unremedied for a period of twenty (20)
days after written notice shall have been given by
the Holder to the Company;
(iv) this Note or the Purchase Agreement
shall cease to be enforceable in accordance with
its terms against the Company, or the Company
shall so state in writing;
(v) the Company shall default beyond
any period of grace provided with respect thereto
in the payment of principal of, premium, if any,
or interest on any obligation in an amount in
excess of $50,000 in respect of borrowed money
when due, whether by acceleration or otherwise; or
the Company shall default in the performance or
observance of any other agreement under which any
such obligation is created, if the effect of any
such default is to cause or permit the holder or
holders of such obligation (or a trustee on behalf
of such holder or holders) to cause such
obligation to become due prior to the date of its
stated maturity, unless such holder or holders or
trustee shall have waived such default after its
occurrence or unless such holder or holders or
trustee shall have failed to give any notice
required to create an event of default thereunder;
(vi) the institution by the Company of
proceedings to be adjudicated as bankrupt or
insolvent, or the consent by it to the institution
of bankruptcy or insolvency proceedings against
it, or the filing by it of a petition or answer or
consent seeking reorganization or release under
the Federal Bankruptcy Act or any other applicable
federal or state law, or the consent by it to the
filing of any such petition or the appointment of
a receiver, liquidator, assignee, trustee or other
similar official of the Company, or the making by
it of an assignment for the benefit of creditors,
or the taking of corporate action by the Company
in furtherance of any such action; or
(vii) if, within sixty (60) days after
the commencement of an action against the Company
seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or
similar relief under any present or future
statute, law or regulation, such action shall not
have been resolved in favor of the Company or all
orders or proceedings thereunder affecting the
operations or the business of the Company stayed,
or if the stay of any such order or proceeding
shall thereafter be set aside, or if, within sixty
(60) days after the appointment, without the
consent or acquiescence of the Company, of any
trustee, receiver or liquidator of the Company or
of all or any substantial part of its properties,
such appointment shall not have been vacated.
1.2 In the case any one or more of the
Events of Default specified in Section 1.1 hereof shall have
occurred and be continuing, the Holder may, subject to the
provisions of Section 1.3 hereof, proceed to protect and
enforce its rights hereunder, either by suit in equity
and/or by action at law, whether for the specific
performance of any covenant or agreement contained in this
Note, or the Holder may proceed to enforce the payment of
all sums due upon this Note or to enforce any other legal or
equitable right of the Holder. If an Event of Default shall
have occurred and the Holder shall employ attorneys, or
incur other costs and expenses for the collection of
payments due or to become due, or for the enforcement or
performance or observance of any obligation or agreement of
the Company under this Note, the Company agrees that it will
pay to the Holder, on demand, the fees of such attorney
together with all other costs and expenses incurred by the
Holder.
1.3 No remedy herein conferred upon the
Holder is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or
otherwise.
1.4 No course of dealing between the Company
and the Holder or any delay on the part of the Holder hereof
in exercising any rights hereunder shall operate as a waiver
of any rights of the Holder hereof.
2. CONVERSION.
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2.1 Automatic Conversion. Unless this Note
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shall have been previously paid in full or converted
pursuant to Section 2.2, the outstanding principal amount of
this Note and accrued and unpaid interest thereon
automatically shall be converted into fully paid and
nonassessable shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock"), on the close of
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business on May 31, 1997. The number of shares of Common
Stock into which this Note will be so converted shall be
determined by dividing the aggregate principal amount and
interest to be converted by the Conversion Price (as defined
below) in effect at the time of such conversion. The
conversion price (the "Conversion Price") initially shall
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equal $1.00, and shall be subject to adjustment as provided
in Section 3.
2.2 Optional Conversion on Maturity Date.
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On the Maturity Date and at the Holder's option, the Holder
may elect to convert this Note into shares of Common Stock
in lieu of the repayment by the Company of the principal and
accrued interest due hereunder. The number of shares into
which this Note will be so converted will be determined by
reference to the Conversion Price in effect on the Maturity
Date. In order to so convert this Note, the Holder shall
notify the Company of its election to do so three (3) days
prior to the closing of a permanent financing or promptly
upon Xxxxxx's receiving notification of the occurrence of an
Event of Default, as the case may be.
2.3 Mechanics and Effect of Conversion. No
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fractional shares of Common Stock will be issued upon
conversion of this Note. In lieu of any fractional shares
to which the Holder would otherwise be entitled, the Company
will pay to the Holder the cash value of any fractional
share. Upon conversion of this Note into Common Stock
pursuant to Sections 2.1 or 2.2, the Holder shall surrender
this Note at the principal executive offices of the Company,
together with a written notice stating the name or names
(with address or addresses) in which the certificate or
certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued. At its
expense, the Company will, as soon as practicable after
receipt of this Note, issue and deliver to such Holder at
such principal executive office, a certificate or
certificates for the number of shares of Common Stock to
which such Holder is entitled upon such conversion, together
with any other securities and property to which the Holder
is entitled upon such conversion under the terms of this
Note, including a check payable to the Holder for any cash
amounts payable in respect of fractional shares. Whether or
not the Holder so delivers this Note and such notice as
aforesaid, such conversion shall be deemed to have been made
on the close of business on the date set forth in Section
2.1 on which this Note automatically converts, or on the
close of business on the Maturity Date, as the case may be,
and the Holder shall be treated for all purposes as the
record holder of such shares of Common Stock as of such
date.
3. ANTI-DILUTION AND OTHER PROVISIONS.
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3.1 Adjustments for Stock Dividends,
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Subdivisions, Combinations and Reclassifications. If the
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Company shall (i) pay a stock dividend or make a
distribution to holders of Common Stock in shares of its
Common Stock, (ii) subdivide its outstanding shares of
Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any shares of
capital stock of the Company, then (A) the Conversion Price
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shall be increased or decreased, as the case may be, to an
amount which shall bear the same relation to the Conversion
Price in effect immediately prior to such action as the
total number of shares of Common Stock outstanding
immediately prior to such action shall bear to the total
number of shares of Common Stock outstanding immediately
after such action, and (B) this Note automatically shall be
adjusted so that it thereafter shall be convertible into the
kind and number of shares of Common Stock or other
securities which the Holder would have owned and would have
been entitled to receive after such action if this Note had
been converted immediately prior to such action or any
record date with respect thereto. An adjustment made
pursuant to this Section 3.1 shall become effective
retroactively immediately after the record date in the case
of a dividend or distribution of Common Stock and shall
become effective immediately after the effective date in the
case of a subdivision, combination or reclassification.
3.2 Adjustment for Certain Distributions.
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If the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including,
without limitation, any such distribution made in connection
with a consolidation or merger in which the Company is the
continuing corporation) of (i) assets (including cash
dividends), (ii) equity or debt securities of the Company
(except for the Common Stock of the Company) or evidences of
indebtedness of the Company, (iii) equity or debt securities
of any corporation other than the Company or evidences of
indebtedness of any such corporation, or (iv) subscription
rights, options or warrants to purchase any of the foregoing
assets or securities, whether or not such rights, options or
warrants are immediately exercisable (hereinafter
collectively called "Distributions on Common Stock"), the
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Company shall make provisions for the Holder to receive upon
conversion of this Note a proportional amount (depending
upon the extent to which this Note is converted) of such
assets, equity or debt securities, evidences of indebtedness
or such other rights, as if such Holder had converted this
Note on or before such record date.
3.3 Adjustment for Consolidations and
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Mergers. In case of any consolidation or merger of the
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Company with or into another corporation or the sale of all
or substantially all of the assets of the Company to another
corporation, this Note thereafter shall be convertible into
the kind and amount of shares of stock or other securities
or property to which a holder of the number of shares of
Common Stock issuable upon conversion of this Note would
have been entitled upon such consolidation, merger or sale;
and, in such case, appropriate adjustment (as determined in
good faith by the Board of Directors of the Company) shall
be made in the application of the provisions in this Section
3, to the end that the provisions set forth in this Section
3 (including provisions with respect to changes in and
adjustments of the number of shares of Common Stock into
which this Note is convertible) shall thereafter be
applicable, as nearly as reasonably may be, in relation to
any shares of stock or other securities or property
thereafter deliverable upon the conversion of this Note.
3.4 Other Dilutive Events. If any event
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shall occur as to which the provisions of this Section 3
shall not be strictly applicable, but with respect to which
the failure to make any adjustment to the Conversion Price
and the number of shares of Common Stock issuable upon
conversion of this Note would not fairly protect the
conversion rights contained in this Note in accordance with
the intent and principles of this Section 3, upon request of
the Holder, the Company shall appoint a firm of independent
public accountants reasonably acceptable to the Holder which
shall give its opinion upon the adjustments, if any,
consistent with the intent and principles established in
this Section 3 necessary to preserve without dilution the
conversion rights represented by this Note. Upon receipt of
such opinion, the Company will promptly mail a copy thereof
to the Holder and shall make the adjustments described
therein.
3.5 No Impairment. The Company will not, by
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amendment of its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of
this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the
conversion rights of the Holder against impairment.
3.6 Notices to Holder.
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If at any time,
(a) the Company shall take any action which
would require an adjustment pursuant to this
Section 3 in the Conversion Price or in the number
of shares of Common Stock issuable upon conversion
of this Note; or
(b) the Company shall authorize the making
to the holders of its Common Stock of any
Distributions on Common Stock as set forth in
Section 3.2; or
(c) the Company shall issue any additional
shares of Common Stock or declare any dividend (or
any other distribution) on its Common Stock; or
(d) there shall be any capital
reorganization or reclassification of the Common
Stock, or any consolidation or merger to which the
Company is a party, or any sale or transfer of all
or substantially all of the assets of the Company;
or
(e) there shall be a voluntary or
involuntary dissolution, liquidation or winding up
of the Company;
then, in any one or more of such cases, the Company shall
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give written notice to the Holder, not less than twenty (20)
days before any record date or other date set for definitive
action, or of the date on which such reorganization,
reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may
be. Such notice also shall set forth such facts as shall
indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the
current Conversion Price and the kind and amount of Common
Stock and other securities and property deliverable upon
conversion of this Note. Such notice also shall specify the
date as of which the holders of the Common Stock of record
shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case
may be.
3.7 Reservation of Stock. The Company
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covenants that it will at all times reserve and keep
available, solely for issuance upon conversion of this Note,
such number of shares of Common Stock as shall then be
sufficient to effect conversion of this Note. If at any
time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of
this Note, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose;
provided, however, that the Company will not take any action
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which results in any adjustment of the Conversion Price if
the total number of shares of Common Stock issued and
issuable after such action upon conversion of this Note
would exceed the total number of shares of Common Stock then
authorized by the certificate of incorporation of the
Company.
3.8 Notice of Adjustment of Conversion
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Price. Upon any adjustment of the Conversion Price, then
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and in each such case the Company shall give notice thereof
to the Holder, which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable
detail the method of calculation and the facts upon which
such calculation is based.
3.9 Closing of Books. The Company will at
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no time close its transfer books against the transfer of any
shares of Common Stock issued or issuable upon the
conversion of this Note in any manner which interferes with
the timely conversion of this Note.
4. EXCHANGE OR REPLACEMENT OF NOTE.
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4.1 The Holder, at its option, may in person
or by duly authorized attorney surrender this Note for
exchange, at the principal executive offices of the Company,
and, at the expense of the Company, receive in exchange
therefor a new Note in the same aggregate principal amount
as the aggregate unpaid principal amount of the Note so
surrendered, bearing interest at the same annual rate as the
Note so surrendered and otherwise in substantially the form
of the Note so surrendered.
4.2 Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or
mutilation of this Note, and (in case of loss, theft or
destruction) of an indemnity reasonably satisfactory to it,
and upon surrender and cancellation of this Note, if
mutilated, the Company, upon reimbursement to it of
reasonable expenses incidental thereto, will make and
deliver a new Note, of like tenor, in lieu of this Note.
4.3 Any Note made and delivered in
accordance with the provisions of this Section 5 shall be
dated as of the original issuance date.
5. MISCELLANEOUS.
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5.1 The Company hereby waives presentment
for payment, demand, notice of non-payment, protest and
notice of protest.
5.2 This Note shall be binding upon the
Company and its successors and assigns and shall inure to
the benefit of the Holder and its successors, assigns and
transferees.
5.3 All headings used herein are for
convenience only and shall not be used to construe or
interpret this Note.
5.4 All notices required or permitted under
this Note shall be given in writing and shall be sent in
accordance with the provisions of Section 8.9 of the
Purchase Agreement.
5.5 THIS NOTE SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE. ANY JUDICIAL PROCEEDING INVOLVING
ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING
TO THIS NOTE SHALL BE BROUGHT ONLY IN A COURT LOCATED IN THE
STATE OF DELAWARE AND EACH OF THE PARTIES HERETO (I)
UNCONDITIONALLY ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH
COURTS AND ANY RELATED APPELLATE COURT AND IRREVOCABLE
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY, AND
(II) IRREVOCABLY WAIVES ANY OBJECTION SUCH PARTY MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.
5.6 For purposes hereof, the term "permanent
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financing" means a transaction (whether or not arranged by
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Tandem (as defined in the Purchase Agreement)) pursuant to
which the Company receives no less than $2.5 million of
proceeds from an institutional investor (or investors),
which transaction may either be in the form or the sale of
Company equity or the incurrence by the Company of
indebtedness (or both), and, if the transaction is the
incurrence of debt (in whole or in part), such indebtedness
is due no less than one (1) year from the date of its
incurrence.
IN WITNESS WHEREOF, the Company has executed this
Note on the date specified above.
COVER-ALL TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Authorized Officer
