EXHIBIT 10.2
THIS NOTE AND THE SHARES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE. THE NOTE AND THE SHARES
MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THIS NOTE AND THE
SHARES OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT.
RXBAZAAR, INC.
10% UNSECURED CONVERTIBLE BRIDGE NOTE
$________. ___________,2003
FOR VALUE RECEIVED, the undersigned RxBAZAAR, INC., a Delaware corporation
(the "Company"), hereby promises to pay to the order of _______________ (the
"Holder"), the principal sum of ___________ Thousand ($_00,000) Dollars in
United States funds, together with interest thereon, at such rates and such
times as are hereinafter specified.
This Note is one of duly authorized issue of 10% Unsecured Convertible
Bridge Notes (the "Notes") of the Company in an aggregate principal amount of up
to $3,300,000 issued in a private placement as part of a Unit, being one of a
duly authorized issue of up to 33 Units of the Company. Each Unit consists of a
Note in principal amount of $100,000 and a warrant (the "Warrant") to purchase
10,000 shares of the Company's common stock, $0.001 par value (the "Common
Stock"). This Note was immediately detachable from the Unit and separately
transferable therefrom. The Units were purchased pursuant to a Subscription
Agreement, dated __, 2003, between the Company and the initial Holder hereof.
The following is a statement of the rights of the Holder and the conditions
to which this Note is subject, and to which the Holder hereof, by the acceptance
of this Note, agrees:
1. INTEREST AND PRINCIPAL
1.01 Interest. This Note shall bear interest on the outstanding
principal amount of this Note at the rate of ten percent (10%) per annum,
payable monthly in cash. Interest shall accrue from the date of issuance and
shall be paid on the first business day of each month, commencing June 1, 2003
and continuing until the entire principal amount is paid or otherwise satisfied
in full.
1.02 Principal Payment. The entire outstanding principal amount,
together with any accrued and unpaid interest, shall be due and payable on April
__, 2004 (the "Maturity Date").
2. PREPAYMENT OF THE NOTE
2.01 Prepayment. The Company shall prepay the outstanding principal
amount, together with any accrued and unpaid interest, on the ninetieth (90th)
day following the closing date of a private placement or firm commitment
underwritten public offering of the Company's securities in which the gross
proceeds are at least $6,000,000 (the "Mandatory Prepayment"). In addition, the
Company may, at its sole discretion, prepay at any time all or from time to time
any part of the outstanding principal amount, together with any accrued and
unpaid interest on the principal amount being repaid.
2.02 Notice. In the event of any prepayment of this Note pursuant to
Section 2.01 hereof, the Company shall give written notice to the Holder setting
forth the amount of principal hereof to be prepaid, the prepayment date (the
"Prepayment Date") and the right of the Holder to convert any portion of this
Note at any time prior to the Prepayment Date. The foregoing notice must be
given at least ten (10) days prior to the Prepayment Date. Should the public
offering not be consummated, the Mandatory Payment shall not be effective and
this Note shall remain in effect as to the principal amount then outstanding,
and the Company shall give written notice to the Holder of cancellation of such
Mandatory Prepayment.
2.03 Allocation Among Holders. If less than the entire principal amount
of all Notes at the time outstanding shall be called for prepayment at any time,
the Company will allocate the principal amount so called for prepayment among
the holders of all Notes in proportion, as nearly as may be, to the aggregate
principal amount of Notes then held by the respective holders thereof. In any
such allocation (i) the Company may, according to such method as it shall deem
proper in its discretion, make such adjustments by increasing or decreasing by
not more than $1,000 the amount which would be allocable on the basis of exact
proportion to any holders, as may be necessary to the end that the principal
amount so allocated shall be in each instance an integral multiple of $1,000 and
(ii) the Company shall not be required to allocate any amount to any holder to
which the amount allocable on the basis of the exact proportion would be less
than $1,000.
2.04 Prepayment of Portion of Note. Upon any prepayment of a portion of
the principal amount of this Note, the Holder, at his option, (i) may require
the Company to execute and deliver at the expense of the Company a new Note
dated as of the date to which interest on this Note has been paid, and payable
to such person or persons as may be designated by the Holder, for the aggregate
principal amount of this Note then remaining unpaid, upon surrender of this Note
and payment of applicable transfer taxes, if any, or (ii) may present this Note
to the Company for notation hereon of the payment of the portion of the
principal amount of this Note so prepaid.
2.05 Note to Become Due on Date Called for Prepayment. If this Note or
a portion hereof is called for prepayment as herein provided, then this Note or
such portion shall become due and payable on the Prepayment Date stated in such
notice and shall cease to bear interest on and after such Date, unless, upon
presentation, the Company shall fail to prepay this Note then outstanding or
such portion, as the case may be.
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3. CONVERSION
3.01 Right to Convert. Subject to and upon compliance with the
provisions hereof, the Holder shall have the right, at the Holder's option, at
any time after issuance of the Note and prior to the Maturity Date, to convert
all or any portion of the principal of this Note into shares of Common Stock
(the "Conversion Shares") at a price of $2.50 per share, subject to adjustment
pursuant to the further provisions of Section 4 hereof (the "Conversion Price").
Upon any conversion of this Note, no payment or adjustment will be made for
interest hereon for the principal amount being covered.
3.02 Exercise of Conversion Privilege. (a) In order to exercise the
conversion privilege, the Holder shall surrender this Note to the Company at its
principal office, accompanied by a written notice to the Company that the Holder
elects to convert this Note, or if less than the entire unpaid principal amount
hereof is to be converted, the portion hereof to be converted, and, if requested
by the Company, accompanied by a duly executed certificate of transfer. Such
notice shall also state the name or names (with address or addresses) in which
the certificate or certificates for shares of Conversion Shares shall be issued.
As soon as practicable after the receipt of such documents, the Company shall
issue and deliver at the address of the Holder, or on his written order, to a
third party, a certificate or certificates for the number of full shares of
Conversion Shares issuable upon conversion of this Note or portion thereof. Such
conversion shall be deemed made immediately prior to the close of business on
the date on which the documents deliverable upon conversion of this Note are
delivered to the Company. At such time the rights of the Holder as such Holder
shall cease and the person or persons in whose name or names any certificate or
certificates for shares of Conversion Shares shall be issuable upon such
conversion shall be deemed to have become the Holder or Holders of Record of the
shares of Conversion Shares represented thereby. "Holder(s) of Record" shall
mean in connection with any Note the payee thereof unless a subsequent holder
shall have presented to the Company such Note, duly assigned to him and
delivered to the Company with a written notice of his acquisition of the Note
and designated in writing an address to which payments and notices in respect of
the Note shall be mailed, in which case the term shall mean the subsequent
holder.
(b) In case this Note is converted in part only, upon such conversion,
the Company shall execute and deliver to the Holder a new Note or Notes of
authorized denomination in aggregate principal amount equal to the unconverted
portion of the principal amount thereof.
3.03 Conversion upon the Event of a Corporate Transaction. Not less
than five (5) days prior to the proposed closing of a Corporate Transaction (as
defined below), the Company shall notify the Holder of the proposed closing, the
Conversion Price and what the Holder would receive on the conversion date for
the conversion. The Note shall be cancelled and deemed paid in full as of the
date on which the conversion of the Note occurs prior to the Corporate
Transaction date. If the proposed Corporate Transaction is not consummated, the
conversion related to such event shall not be effective, and this Note shall be
subject to conversion upon a subsequent Corporate Transaction. "Corporate
Transaction" shall mean any instance that the Company is a party to a
consolidation, merger, combination, reorganization or other transaction in which
the Company is not the surviving corporation or in which the holders of the
Company's voting securities immediately prior to such transaction do not own a
majority of the voting securities of the surviving corporation immediately after
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the transaction, or the sale by the Company of all or substantially all of its
assets to another entity.
3.04 Fractional Shares. If conversion of this Note would result in the
issuance of a fractional share or unit to the Holder, a fractional share or unit
shall not be issued, and instead, the Company shall pay to the Holder in cash an
amount equal to the value of such fractional interest.
4. ANTI-DILUTION
4.01 Stock Splits or Combinations. If the Company shall at any time
prior to the expiration of this Note subdivide its outstanding Common Stock, by
stock split or otherwise, or combine its outstanding Common Stock (including a
reverse split), or issue additional shares of its Common Stock in payment of a
stock dividend in respect of its Common Stock, the Conversion Shares shall
forthwith be proportionately increased in the case of a subdivision or stock
dividend, or proportionately decreased in the case of a combination, and the
Conversion Price then applicable to shares covered by the unexercised portion of
this Note shall forthwith be proportionately decreased in the case of a
subdivision or stock dividend, or proportionately increased in the case of a
combination.
4.02 Reclassification or Reorganization. In case of any
reclassification, capital reorganization, or change of the outstanding Common
Stock of the Company (other than as a result of a subdivision, combination or
stock dividend covered by Section 4.01 hereof), at any time prior to the
expiration of this Note, then, as a condition of such reclassification,
reorganization, or change, lawful provision shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be
delivered to the Holder, so that the Holder shall have the right prior to the
expiration of this Note to purchase, at a total price not to exceed that amount
payable upon the conversion of the unconverted portion of this Note, the kind
and amount of shares of stock and other securities and property receivable upon
such reclassification, reorganization, or change, by a holder of the number of
shares of Common Stock of the Company which might have been received by the
Holder upon conversion immediately prior to such reclassification,
reorganization or change, and in any such case appropriate provisions shall be
made with respect to the rights and interest of the Holder of this Note to the
end that the provisions hereof (including without limitation, provisions for the
adjustment of the Conversion Price and of the number of Conversion Shares
purchasable upon conversion of this Note) shall thereafter be applicable in
relation to any shares of stock and other securities and property thereafter
deliverable upon conversion hereof.
4.03 Merger. In case of any consolidation of the Company with or a
merger of the Company into another corporation or in case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, upon any such consolidation, merger, sale or
conveyance and the surviving entity is a publicly traded company, the Company
agrees that a condition of such transaction will be that the Company or such
successor or purchasing corporation, as the case may be, shall assume the
obligations of the Company hereunder in writing. In the case of any such
consolidation, merger or sale or conveyance, the Holder shall have the right
until the Maturity Date upon payment of the Conversion Price in effect
immediately prior to such action, to receive the kind and amount of shares and
other securities and/or property which he would have owned or have been entitled
to receive after the happening of such consolidation, merger, sale or conveyance
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had this Note been converted immediately prior to such action, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this Section 4
shall similarly apply to successive consolidations, mergers, sales or
conveyances.
4.04 Non-Public Successor. In case of any consolidation of the Company
with or a merger of the Company into another corporation or in case of any sale
or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, upon any such consolidation, merger,
sale or conveyance and the surviving entity is a non-publicly traded company,
the Company agrees that a condition of such transaction will be that the Company
shall mail to the Holder at the earliest applicable time (and, in any event not
less than ten (10) days before any record date for determining the persons
entitled to receive the consideration payable in such transaction) written
notice of such record date. Such notice shall also set forth 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 Conversion Price of and the kind and amount of
the shares of stock and other securities and property deliverable upon
conversion of this Note. Upon the closing of the transaction referenced in the
foregoing notice, this Note, to the extent then unconverted, shall terminate.
5. PAYMENTS
5.01 Delivery of Payment. All payments made hereunder shall be made by
check mailed first class, postage paid to the Holder at the address set forth
next to the Holder's signature in the Subscription Agreement or to such other
address as the Holder may from time to time designate in writing to the Company
pursuant to the Subscription Agreement. Such payments shall be accompanied by a
notice setting forth in reasonable detail (i) the amount of interest and
principal being paid and (ii) the remaining principal amount, if any. If any
payment is required to be made on a day which is not a Business Day (as
hereinafter defined) the date on which such payment is required to be made shall
be extended to, and such payment shall be required to be made on, the next
Business Day. "Business Day" shall mean a day other than Saturday, Sunday and
any day which shall be in the City of Needham, Massachusetts, a legal holiday or
a day on which banking institutions are authorized by law to close.
5.02 Withholding. If any part of the principal or interest payable to
the Holder under this Note shall be subject to withholding under U.S. federal or
state tax laws and regulations, the Company shall satisfy its payment
obligations under this Section 5 with respect to any such amount by withholding
and paying over to the Internal Revenue Service or such other taxing authority,
from any sums payable to Holder under this Note, any and all amounts required by
law to be so withheld.
6. DEFAULTS AND REMEDIES
6.01 Events of Default. "Event of Default", wherever used herein means
any one of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
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(i) default in the payment of any interest upon any of the Notes
for a period of five (5) Business Days after it becomes due and payable; or
(ii) default in the payment of the principal of any of the Notes
at its Maturity; or
(iii) default in the performance, or breach, of any covenant of
the Company in this Note (other than the breach of a covenant or warranty or the
default in performance which is specifically dealt with elsewhere in this
Section), and continuance of such default or breach for a period of ten (10)
Business Days after there has been given, by registered or certified mail, to
the Company by the Holders of at least 51% in aggregate principal amount of the
outstanding Notes, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(iv) the entry of a decree or order by a court having jurisdiction
in the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company under the Federal Bankruptcy Code or
any other applicable Federal or State law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company or of
any substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) consecutive days; or
(v) the institution by the Company of proceedings to be
adjudicated 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 relief under the Federal
Bankruptcy Code or any other applicable Federal or State law, or the consent by
it to the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action; or
(vi) the Company shall be in default in the payment of in excess
of $1,000,000 of money borrowed in any one transaction or pursuant to any one
agreement, the lender thereof shall have exercised its rights to declare said
sum due and payable and such default shall not have been cured or contested in
good faith for a period of sixty (60) days after such declaration; or
(vii) the Company shall have entered against it a final judgment
by a court having jurisdiction which, if satisfied and not appealed or
overturned within sixty (60) days after such judgement, would have a material
adverse effect on the financial condition of the Company.
then and in each and every case, unless the principal of all of the Notes shall
have already become due and payable, the holders of not less than 51% in
aggregate principal amount of the Notes at the time outstanding may by notice in
writing to the Company declare the unpaid balance of all the Notes to be
forthwith due and payable, and thereupon such balance, including the principal
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of the Notes and accrued interest thereon, shall become so due and payable
without presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived.
6.02 Enforcement of Remedies. In case any one or more of the Events of
Default specified in Section 6.01 shall have occurred and be continuing, and the
Note be declared to be due and payable pursuant to the last clause of Section
6.01 hereof, the Holder may proceed to protect and enforce his rights either by
suit in equity or by action at law, for the specific performance of any covenant
or provision contained herein, or proceed to enforce payment of such Note or to
enforce any other legal or equitable right of the Holder of such Note; provided,
however, that, except for enforcement of the payment of principal or interest on
the Notes, such Holder shall be a Holder of Record of, or shall be joined in
such proceeding by other Holders of Record who together with him hold at least
51% in aggregate principal amount of all Notes at the time outstanding.
6.03 Notice to Holders of Record. If any Holder of a Note shall demand
payment thereof or take any other action of which the Company shall have actual
knowledge in respect of an alleged default or Event of Default, the Company will
forth with give written, notice, specifying such action and nature of the
alleged default or Event of Default, to each Holder of Record of the Notes then
outstanding.
6.04 Waiver by Company. To the extent permitted by applicable law, the
Company hereby agrees to waive, and does hereby absolutely and irrevocably waive
and relinquish the benefit and advantage of any valuation, stay, appraisement,
extension or redemption laws now existing or which may hereafter exist, which,
but for this provision might be applicable to any sale made under the judgment,
order or decree of any court or otherwise, based on the Notes or any claim for
interest on the Notes or any foreclosure thereunder.
6.05 Cost and Expense of Collection. The Company covenants and agrees
that if default be made in any payment or prepayment of principal of, or
interest on, the Notes, it will, to the extent permitted under applicable law,
pay to the holder or holders of the Notes such further amount as shall be
sufficient to cover the cost or expense of collection, including reasonable
compensation to the attorneys of the Holder for all services rendered in that
connection.
7. SUBORDINATION. The indebtedness evidenced by this Note, and the payment
of the principal hereof, and any interest hereon, is wholly subordinated, junior
and subject in right of payment, to the extent and in the manner hereinafter
provided, to the prior payment of all Senior Indebtedness of the Company now
outstanding or hereinafter incurred. "Senior Indebtedness" means the principal,
interest and reasonable and customary charges and expenses arising out of or
relating to all indebtedness of the Company for monies borrowed from banks,
trust companies, insurance companies and other financial institutions, and
indebtedness thereto for any related costs, expenses and indemnities. This
Section 7 is and is intended solely for the purposes of defining the relative
rights of the Holder and the holders of Senior Indebtedness and nothing herein
shall impair, as between the Company and the Holder, the obligation of the
Company, which is unconditional and absolute, to pay to the Holder the principal
thereof and interest thereon, in accordance with the terms hereof, nor shall
anything herein prevent the Holder from exercising all remedies otherwise
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permitted by applicable law or hereunder upon default, subject to the rights set
forth above of holders of Senior Indebtedness.
8. USURY. It is the intention of the parties hereto to conform strictly to
applicable usury laws now or hereafter in effect. In the event that any of the
terms or provisions of this Note are in conflict with applicable usury law, this
Section 8 shall govern as to such terms or provisions, and this Note shall in
all other respects remain in full force and effect. If any transaction
contemplated hereby would be usurious, it is agreed that the aggregate of all
consideration which constitutes interest under applicable law that is contracted
for, charged or received under this Note shall under no circumstances exceed the
maximum interest allowed by applicable law. Accordingly, if interest in excess
of the legal maximum is contracted for, charged or received: (i) this Note shall
be automatically reformed so that the effective rate of interest shall be
reduced to the maximum rate of interest permitted by applicable law, for the
purpose of determining said rate and to the extent permitted by applicable law,
all interest contracted for, charged or received shall be amortized, prorated
and spread throughout the full term of this Note so that the effective rate of
interest is uniform throughout the life of this Note, and (ii) any excess of
interest over the maximum amount allowed under applicable law shall be applied
as a credit against the then unpaid principal amount hereof.
9. MISCELLANEOUS
9.01 Waiver of Presentment, Etc. The Company hereby waives presentment,
demand for payment, notice of dishonor, and any and all other notices or demands
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, and hereby consents to any extensions of time, renewals, releases
of any party to this Note, waivers or modifications that may be granted or
consented to by the Holder in respect to the time of payment or any other
provision of this Note.
9.02 Holder as Deemed Owner. The Company may deem and treat the Holder
of Record hereof as the absolute owner of this Note (whether or not this Note
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the Company) for the purpose of receiving payment
hereof or thereof or on account hereof and for all other purposes, and the
Company shall not be affected by notice to the contrary. The Company will act as
registrar for the Notes and any transfers of Notes may be made through the
Company in such capacity.
9.03 Restriction on Transfer. This Note has not been registered under
the securities laws of the United States of America or any state thereof. This
Note has been acquired for investment purposes and no interest in this Note or
in the Conversion Shares may be offered for sale, sold, delivered after sale,
transferred, pledged, or hypothecated in the absence of registration and
qualification of this Note or such Conversion Shares under applicable federal
and state securities laws or an opinion of counsel of the Company reasonably
satisfactory to the Company that such registration and qualification are not
required.
9.04 Corporate Obligation. It is expressly understood that this Note is
solely a corporate obligation of the Company, and that any and all personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every promoter, subscriber,
incorporator, shareholder, officer or director, as such, are hereby expressly
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waived and released by the holder hereof by the acceptance of this Note and as a
part of the consideration for the issue hereof.
9.05 Amendments and Waivers. No course of dealing between the Company
and any Holder of Record and no delay on the part of any Holder of Record in
exercising any rights under the Notes shall operate as a waiver of the rights of
the Holder. No covenant or other provision of the Notes nor any default or Event
of Default in connection therewith may be waived otherwise than by a written
instrument signed by the party so waiving such covenant or other provision or
default or Event of Default. Any provision of the Notes to the contrary
notwithstanding, changes in or additions to the Notes may be made, and
compliance with any term, covenant, condition or provision set forth in the
Notes may be omitted or waived (either generally or in a particular instance and
either retroactively or prospectively), and any default or Event of Default and
the consequences thereof may be waived, by a consent or consents in writing
signed by the Holders of Record of at least 51% in aggregate principal amount of
all Notes at the time outstanding; provided, however, that (i) the Company shall
deliver copies of the form of such consent or consents to any Holder of Record
who did not execute the same; (ii) no such consent shall be effective to reduce
the principal of or rate of interest payable on any Notes, or to postpone the
Maturity Date, or any installment of interest thereon, without the consent of
the Holder of Record of each Note so affected; (iii) no such consent shall be
effective to change the percentage of principal amount of the Notes, the consent
of the holders of which is required under this Section 9.05, without the consent
of the Holders of Record of all Notes at the time outstanding; and (iv) no such
consent shall extend to or impair any obligation not expressly waived or impair
any right consequent thereon. Any consent may be given subject to satisfaction
of conditions stated therein.
9.06 Lost Documents. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note or
any Note exchanged for it, and (in the case of loss, theft or destruction) of
indemnity satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
such Note, if mutilated, the Company will make and deliver in lieu of such Note
a new Note of like tenor and unpaid principal amount and dated as of the
original date of the Note.
9.07 Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS (EXCLUSIVE OF THE LAWS GOVERNING CONFLICTS OF LAWS) OF
THE STATE OF DELAWARE.
RxBAZAAR, INC.
By:
--------------------------------
Name:
Title:
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