EXHIBIT 10.2
CONVERTIBLE PROMISSORY NOTE AND
WARRANT PURCHASE AGREEMENT
This Convertible Promissory Note and Warrant Purchase Agreement (the
"Agreement") is made as of May 19, 1999 by and among E-Docs, Inc., a Delaware
corporation (the "Company"), and the L & H Investment Co. N.V., (the
"Investor").
RECITALS
WHEREAS, the Investor desires to purchase from the Company, and the
Company desires to issue to the Investor, a Convertible Promissory Note in the
form of Exhibit A attached hereto (the "Note") in the aggregate principal amount
of One Million Five Hundred Thousand ($1,500,000.00) and
WHEREAS, the Investor desire to purchase from the Company, and the Company
desires to issue to the Investor, a Warrant in the form of Exhibit B attached
hereto on the terms and conditions set forth herein (the "Warrant"), such
Warrant to purchase that number of shares of "Next Stock" (defined below) of the
Company as determined pursuant to the terms and conditions of this Agreement and
the Warrant.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF NOTE AND WARRANT.
1.1 SALE AND ISSUANCE OF NOTE AND WARRANT.
(a) Subject to the terms and conditions of this Agreement, the
Investor agree to purchase at the Closing (as defined below) and the Company
agrees to sell and issue to the Investor at the Closing (a) a Note in the form
attached hereto as Exhibit A, in the principal amount of One Million Five
Hundred Thousand ($1,500,000.00), at a price equal to 100% of the principal
amount thereof, and (b) a Warrant to purchase such variable number of shares of
the Company's Next Stock in the form attached hereto as Exhibit B.
1.2 CLOSING. The purchase and sale of the Note and the Warrant shall take
place at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxx "X" Xxxxxx,
Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx at 2 p.m. on May 19, 1999, or at such other
time and place as the Company and
the Investor shall mutually agree in writing (which time and place are
designated as the "Closing"). .
1.3 DELIVERIES. At the Closing, the Company shall deliver to the Investor
the Note and the Warrant that the Investor is purchasing against payment of one
million five hundred thousand dollars ($1,500,000.00) by wire transfer of same
day funds.
1.4 CONVERSION OF THE NOTE. Upon the Next Qualified Equity Financing (as
defined below), the principal amount of the Note plus any accrued but unpaid
interest will be automatically converted into that number of shares of the
Company's Next Stock issued in the Next Qualified Equity Financing as is equal
to the then principal balance of the Note plus any accrued but unpaid interest
divided by the price per share of the Company's Next Stock.
1.5 NEXT QUALIFIED EQUITY FINANCING. The term Next Qualified Equity
Financing shall mean the next equity financing involving the receipt by the
Company of at least Five Million Dollars ($5,000,000) (excluding amounts
received on conversion of the Note) which is completed on or before August 15,
1999. Notwithstanding the foregoing, the Next Qualified Equity Financing shall
not include an equity financing that is made in connection with either (i) any
arrangement between the Company and any third party for any research or
development involving the Company (including, without limitation, any
arrangement that includes provision for research support, product development
and/or testing support), (ii) any rights to commercialize any products resulting
from the research or development programs of the Company (including, without
limitation, rights to develop, make, use and/or sell any such products), or
(iii) any other non-monetary consideration.
If no such Next Qualified Equity Financing shall have occurred by August
15, 1999, then the Investor shall have the Note shall become due and payable
upon the election of the Holder.
1.6 NEXT STOCK. The term "Next Stock" shall mean the stock into which the
attached Note is convertible, and for which the attached Warrant is exercisable.
Next Stock shall be the same class and series and have the same rights and
limitations including, but not limited to, anti-dilution protection and
registration rights as the Company's stock, which is the subject of the Next
Qualified Equity Financing. The Investor shall not have any right to modify or
negotiate the terms upon which such stock is issued.
1.7 ALLOCATION OF PURCHASE PRICE TO THE WARRANT. The Company hereby
allocates to the Warrant a purchase price of $0.01 for each share of Next Stock
that the Warrant is exercisable into and such purchase price shall be retained
by the Company from the principal of the Investor's Note by the Company and this
amount will not accrue interest or convert into any other security. Receipt of
such consideration is hereby acknowledged by the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to and for the benefit of the Investor, with knowledge
that the Investor is
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relying thereon in entering into this Agreement and purchasing the Note and the
Warrant from the Company, that the following are true and correct:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operation of its business or properties.
2.2 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Note and the Warrant, and the performance of
all obligations of the Company thereunder has been taken or will be taken prior
to the Closing, and this Agreement, the Note and the Warrant constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (b) as limited
by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies, and (c) to the extent the indemnification
provisions, if any, contained in any of such documents may be limited by
applicable federal or state securities laws.
2.3 VALID ISSUANCE OF NEXT STOCK. The shares of Next Stock of the Company
issuable upon the exercise of the Warrant which may be purchased by the Investor
pursuant to this Agreement have been or will be duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Warrant shall be
duly and validly issued, fully paid and nonassessable, and issued in compliance
with all applicable securities laws, as presently in effect, of the United
States and each of the states whose securities laws govern the issuance of any
of the Warrant pursuant to this Agreement.
2.4 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement and such other filings as may be required by
applicable state securities laws.
2.5 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in material
violation or default of any provisions of its Certificate of Incorporation or
Bylaws or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company or
otherwise in breach of any of the terms or conditions of any contract or
agreement which breach, either individually or in the aggregate, could
reasonably be expected to have a materially adverse effect on the business,
properties, financial condition or results of
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operations of the Company. To the Company's knowledge, no other party to any of
its material contracts or agreements is in material default under any such
contract or agreement. The execution, delivery and performance of this
Agreement, the Note and the Warrant, and the consummation of the transactions
contemplated hereby and thereby shall not result in any such material violation
or be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument,
judgment, order, writ, decree or contract or an event that results in the
creation of any lien, charge or encumbrance upon any assets of the Company or
the suspension, revocation, impairment, forfeiture or nonrenewal of any material
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
2.6 DISCLOSURE. The Company has fully provided the Investor with all the
information which the Investor have requested for deciding whether to purchase
the Note and the Warrant and all information which the Company believes is
reasonably necessary to enable the Investor to make such decision. Neither this
Agreement nor any other written statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements in this
Agreement or therein not misleading.
2.7 OTHER INSTRUMENTS. The Company hereby acknowledges that immediately
upon the Closing, the holders of the Company's Series D Preferred Stock
(including the Investor) will be entitled to an adjustment of the Series D
Conversion Price (as that term is defined in the Company's amended and restated
certificate of incorporation) as if the Company had sold equity securities at
the Closing for one dollar per share.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants to and for the benefit of the Company, with knowledge
that the Company is relying thereon in entering into this Agreement and issuing
the Note and the Warrant to the Investor, as follows:
3.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. By the Investor's execution of this
Agreement, the Investor hereby confirm that the Note and Warrant to be received
by the Investor, the Next stock issuable upon conversion of the Note, and the
Next Stock issuable upon exercise of the Warrant (collectively, the
"Securities") shall be acquired for investment for the Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Investor have no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, the Investor further represent that the Investor do not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities. The Investor represents that it has full power
and authority to enter into this Agreement.
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3.2 INVESTMENT EXPERIENCE. The Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Securities.
3.3 ACCREDITED INVESTOR. The Investor is an "accredited investor" within
the meaning of Securities and Exchange Commission Rule 501 of Regulation D, as
now in effect.
3.4 RESTRICTED SECURITIES. The Investor understands that the Securities it
is and shall be purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, the Investor represents that it is familiar
with Rule 144 promulgated under the Act, as now in effect, and understands the
resale limitations imposed thereby and by the Act.
3.5 LEGENDS. The Investor understand that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act") or the
securities laws of any state of the United States. The securities evidenced by
this certificate may not be offered, sold or transferred for value directly or
indirectly, in the absence of such registration under the Act and qualification
under applicable state laws, or pursuant to an exemption from registration under
the Act and qualification under applicable state laws, the availability of which
is to be established to the reasonable satisfaction of the Company.
(b) Any legend required by the laws of the states of California or
Delaware, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.
(c) Any legend required to be placed on the Securities purchased by
Investor in any future sale or offering of any Securities.
(d) A legend memorializing Section 5 below.
4. RESTRICTIONS ON DISPOSITION. Without in any way limiting the
representations set forth in Section 3 above, the Investor further agrees not to
make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 4, and in addition thereto, one of the following conditions is
satisfied:
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4.1 SECURITIES REGISTERED. There is then in effect a registration
statement under the Act covering such proposed disposition and such disposition
is made in accordance with such registration statement.
4.2 REGISTRATION NOT REQUIRED. The Investor shall have (i) notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition and
(ii) if reasonably requested by the Company, furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such securities under the Act;
provided, however, that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144, except in unusual circumstances.
5. MARKET STAND-OFF AGREEMENT. During the period of duration (not to exceed
180 days) specified by the Company and an underwriter of Common Stock or other
securities of the Company, following the effective date of a registration
statement of the Company filed under the Act, the Investor shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to transferees or donees who agree to be similarly bound) any securities of
the Company held by it at any time during such period except Common Stock
included in such registration; provided, however, that this Section 5 shall be
applicable (a) only to the first such registration statement of the Company
pursuant to which Common Stock (or other securities) of the Company are to be
sold on its behalf to the public in an underwritten offering, and (b) only if
all officers and directors of the Company and all persons with registration
rights enter into similar agreements. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Common Stock of the Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
6. CALIFORNIA COMMISSIONER OF CORPORATIONS.
6.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
7. GENERAL PROVISIONS.
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7.1 CONSTRUCTION. This Agreement shall be governed, construed and enforced
in accordance with the internal laws of the State of Texas, without giving
effect to its conflicts of laws or principles.
7.2 ENTIRE AGREEMENT. This Agreement, together with the agreements and
documents referred to herein, constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior and
contemporaneous negotiations, agreements and understandings.
7.3 NOTICES. All payments, notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the earlier of (i) the time of actual delivery or (ii) on the
third business day following the date deposited with the United States Postal
Service, postage prepaid, certified with return receipt requested, to the
parties at the following addresses or at such other address as shall be given in
writing by a party to the other parties as set forth on the signature page.
7.4 SUCCESSORS AND ASSIGNS. This Agreement, and the rights and obligations
of each of the parties hereunder, may not be assigned by the Investor without
the prior written consent of the Company. Subject to the foregoing sentence,
this Agreement shall inure to the benefit of, and shall be binding upon, the
parties and their successors and assigns.
7.5 SEVERABILITY. If any term, covenant or condition of this Agreement is
held to be invalid, void or otherwise unenforceable by any court of competent
jurisdiction, the remainder of this Agreement shall not be affected thereby and
the term, covenant and condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
7.6 MODIFICATION. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Investor. Any amendment or waiver effected in
accordance with this Section shall be binding upon all parties to this
Agreement, including, without limitation, any holder who may not have executed
such amendment or waiver, and each future holder of any equity security into
which the Note is convertible and/or any holder of Next Stock that is received
upon the exercise of the Warrant.
7.7 ATTORNEY'S FEES. If any action of law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to an award of its reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.
7.8 COUNSEL TO THE INVESTOR. The Company agrees to pay the reasonable
legal fees and expenses of FLV's special counsel, Xxxxxxx, Xxxxxxx & Xxxxxxxx
LLP not to exceed $5,000. Such fees shall be withheld from the Closing and
Xxxxxxx, Phleger & Xxxxxxxx LLP
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shall provide the Company a xxxx for such services with 30 days of the Closing.
The Company acknowledges and agrees that this Agreement has been prepared by
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel to the Investor, which counsel has
represented the interests of Investor and not those of the Company with respect
to the transaction documented by this Agreement.
7.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first written above.
COMPANY:
E-DOCS, INC., a Delaware corporation
By: ____________________________________
Xxxxxxx Xxxxxxxx, President and Chief
Executive Officer
INVESTOR:
L & H Investment Co. N.V.
By: ___________________________________
Xxxxxx Xxxxx
L & H Investment Co. X.X.
Xxx Xxxxxxxxxxxxx 0
X-0000
Xxxxxxxx, Xxxxxxx
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EXHIBIT A
FORM OF PROMISSORY NOTE
NEITHER THIS CONVERTIBLE PROMISSORY NOTE NOR ANY OF THE SECURITIES ISSUABLE
HEREUNDER HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES, OR DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT OR UNLESS SOLD IN FULL
COMPLIANCE WITH RULE 144 UNDER THE ACT.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS CONVERTIBLE SECURED
PROMISSORY NOTE HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF
THE STATE OF CALIFORNIA OR THE STATE OF DELAWARE OR ANY OTHER STATE AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SUCH SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE, OR APPLICABLE
PROVISIONS OF THE SECURITIES LAWS OF DELAWARE OR ANY OTHER STATE. THE RIGHTS OF
THE HOLDER OF THIS CONVERTIBLE PROMISSORY NOTE ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
Los Angeles, California
May ___, 1999
E-DOCS, INC.
CONVERTIBLE PROMISSORY NOTE
E-Docs, Inc., a Delaware corporation (the "Company"), for value received,
hereby promises to pay to Investor (the "Holder"), the principal amount of one
million five hundred thousand dollars ($1,500,000.00) (the "Issue Price"),
together with interest on the unpaid amount thereof in accordance with the terms
hereof, from the date hereof until paid or converted in accordance with the
terms hereof.
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1. TERMS OF THE CONVERTIBLE PROMISSORY NOTE (THE "NOTE").
1.1 INTEREST RATE. The rate of interest hereunder ("Interest Rate") shall
be ten percent (10%) per annum and shall be computed on the basis of a 365 day
year for the actual number of days elapsed.
1.2 PAYMENT. Subject to the provisions of Section 2 regarding conversion
of this Note, the Issue Price plus all accrued but previously unpaid interest
thereon (the "Conversion Amount") shall become due and payable on the earliest
of (i) August 15, 1999 (ii) immediately prior to the closing of the acquisition
of a majority of stock of the Company by another entity by means of a
transaction or a series of related transactions or (iii) the closing of the sale
of all or substantially all of the assets of the Company, unless the Company
stockholders of record prior to such acquisition or sale set forth in (ii) and
(iii) above shall hold at least fifty percent (50%) of the voting power of the
acquiring or surviving entity immediately after such acquisition or sale ("Due
Date"). Payment shall be made at the offices or residence of the Holder, or at
such other place as the Holder shall have designated to the Company in writing,
in lawful money of the United States of America.
1.3 CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT. This Note is issued
by the Company in connection with that certain Convertible Promissory Note and
Warrant Purchase Agreement dated the date hereof (the "Agreement") among the
Company and the Holder, and is subject to, and Holder and the Company shall be
bound by, all the terms, conditions and provisions of the Agreement.
2. CONVERSION.
2.1 TIMING. Upon the completion of the Next Qualified Equity Financing (as
defined below), the Conversion Amount shall be automatically converted into that
number of fully paid and nonassessable shares of the Company's Next Stock
(defined below) issued in the Next Qualified Equity Financing as is equal to the
Conversion Amount divided by the per share purchase price of the Next Stock (the
"Per Share Price") provided that in no event shall the Per Share Price exceed
one dollar ($1.00), with any fraction of a share rounded up to the next whole
share of the Next Stock. Provided, however, that if there is no Next Qualified
Equity Financing before August 15, 1999, then the Note shall become due and
payable upon the demand of the Holder at any time on or after August 15, 1999.
2.2 NEXT QUALIFIED EQUITY FINANCING. The term "Next Qualified Equity
Financing" is defined for purposes of this Note in Section 1.4 of that certain
Convertible Promissory Note and Warrant Purchase Agreement of even date
herewith.
2.3 NEXT STOCK. The term "Next Stock" is defined for purposes of this Note
in Section 1.5 of that certain Convertible Promissory Note and Warrant Purchase
Agreement of even date herewith.
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2.4 CONVERSION PROCEDURE. Written notice of the Next Qualified Equity
Financing shall be delivered to the Holders of this Note before or promptly
after the closing date of the Next Qualified Equity Financing (the "Conversion
Date"), at the address last shown on the records of the Company for the Holder
or given by the Holder to the Company for the purpose of notice (or, if no such
address appears or is given, at the residence of the Holder), notifying the
Holder of the conversion to be effected, including specifying (i) the Conversion
Amount (calculated as of the Conversion Date), (ii) the Per Share Price, (iii) a
term sheet setting forth the rights, preferences, privileges and terms and
conditions of issuance and sale of the Next Stock and the Conversion Date, and
(iv) copies of all relevant documentation evidencing the sale of the Next Stock
in the Next Qualified Entity Financing including any stock purchase agreement,
stock restriction agreement, and investor's rights agreement. The Holder shall
have no right to negotiate any of the terms or conditions upon which the Next
Stock shall be issued, which negotiation shall be conducted solely among the
Company and the purchasers of the Next Stock.
2.5 TERMINATION OF RIGHTS UPON CONVERSION. Provided notice is given by the
Company in accordance with Section 2.4, conversion shall be deemed effective on
the Conversion Date, and the Holders of this Note shall have no further rights
under this Note, whether or not this Note is surrendered. Conversion shall be
deemed effective upon issuance of Next Stock.
2.6 DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after any
conversion of this Note and the Holders' surrender of this Note, the Company, at
its expense, shall issue and deliver to the Holders of this Note a certificate
or certificates evidencing the number of shares of Next Stock issuable to the
Holders upon any such conversion.
3. MISCELLANEOUS.
3.1 TRANSFER OF NOTE. This Note shall not be transferable or assignable in
any manner, except to affiliates of Investor, and no interest shall be pledged
or otherwise encumbered by the Holders without the express written consent of
the Company, and any such attempted disposition of this Note or any portion
hereof shall be of no force or effect.
3.2 TITLES AND SUBTITLES. The titles and subtitles used in this Note are
for convenience only and are not to be considered in construing or interpreting
this Note.
3.3 NOTICES. Any notice required or permitted under this Note shall be
given in writing and in accordance with Section 8.3 of the Agreement (for
purposes of which the term "Investor" shall mean the Holder hereunder), except
as otherwise expressly provided in this Note.
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3.4 ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Note, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
3.5 AMENDMENTS AND WAIVERS. This Note is issued by the Company pursuant to
that certain Convertible Promissory Note and Warrant Purchase Agreement dated
May 19, 1999. Other than the right to the payment of the Issue Price and all
accrued but unpaid interest thereon, which may only be amended or waived with
the written consent of the Holder, any other term of this Note may be amended
and the observance of any other term of this Note may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Holder, and in
accordance with the Agreement. Any amendment or waiver effected in accordance
with this Section 3.5 shall be binding upon the Holder of this Note (and of any
securities into which this Note is convertible), each future holder of all such
securities and the Company.
3.6 SEVERABILITY. If one or more provisions of this Note are held to be
unenforceable under applicable law, such provision shall be excluded from this
Note and the balance of the Note shall be interpreted as if such provision were
so excluded and shall be enforceable in accordance with its terms.
3.7 GOVERNING LAW. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of Texas, without giving
effect to its conflicts of laws principles.
Date: May 19, 1999 E-DOCS, INC., a
Delaware corporation
By: _____________________________
Xxxxxxx Xxxxxxxx,
President and
Chief Executive Officer
[SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE]
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EXHIBIT B
FORM OF WARRANT
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NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE
SECURITIES LAWS OF ANY STATE; THEREFORE, THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH
REGISTRATION OR UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE
OR TRANSFER.
WARRANT TO PURCHASE COMMON STOCK
OF
APPLIED VOICE RECOGNITION, INC.
VOID AFTER MAY 31, 2002
This certifies that L & H INVESTMENT COMPANY N.V., a Belgian company
("L&H"), is entitled to purchase such number of shares of fully paid and
nonassessable shares of Common Stock, $0.001 par value (the "Common Stock") as
is described below, of Applied Voice Recognition, Inc., a Delaware corporation
doing business as x-XXXX.xxx (the "Company"), at a price equal to $1.25 per
share. This Warrant is issued pursuant to that certain Convertible Promissory
Note and Warrant Purchase Agreement dated of even date herewith (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, the Company also issued L&H
that certain Convertible Promissory Note dated May __, 1999 (the "Note"). Shares
may be purchased at any time, in whole or in part, after the earlier of (i) the
date of the closing of the Company's Next Qualified Equity Financing (as defined
in the Purchase Agreement) or (ii) the date of the Company's repayment of all
principal and interest due under the Note; provided, however, in no event may
this Warrant be exercised later than 5:00 p.m. (Houston Time) on May 31, 2002.
The purchase price per share of Common Stock from time to time in
effect under this Warrant, and the number and character of shares covered
hereby, shall be subject to adjustments from time to time in certain instances
as follows, and the term "Exercise Price" shall mean the price
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per share originally set forth in this Warrant or any price resulting from
adjustments pursuant to the terms hereof. The shares of Common Stock deliverable
upon such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as "Warrant Stock". The term "Holder" shall refer to L&H or any
person holding this Warrant in accordance with the terms hereof.
(a) EXERCISE OF WARRANT.
(1) Subject to and in accordance with the provisions hereof, this
Warrant may be exercised in whole or in part during the Exercise Period,
by presentation and surrender hereof to the Company or at the office of
its stock transfer agent, if any, with the Purchase Form annexed hereto
duly executed and accompanied by payment of the Exercise Price for the
number of shares specified in such form, together with all applicable
federal and state taxes. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to
purchase the balance of the shares purchasable hereunder. Upon receipt by
the Company of this Warrant at the office or agency of the Company, in
proper form for exercise and pursuant to compliance herewith, together
with payment of the Exercise Price, the Holder shall be deemed to be the
holder of record, for all purposes, of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder. Upon
receipt of the required deliveries, the Company shall, as promptly as
practicable, and in any event within ten days thereafter, cause to be
issued and delivered to the Holder hereof or the transferee designated in
the Purchase Form a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise
registered in the name of the Holder hereof, or the name of the transferee
so designated, as the case may be.
(2) In addition to the method of payment set forth in paragraph (1)
above and in lieu of any cash payment required thereunder, the Holder
shall have the right at any time and from time to time to exercise this
Warrant in full or in part by surrendering this Warrant in the manner
specified in paragraph (1) above in exchange for the number of shares of
Common Stock equal to the product of (x) the number of shares to which
this Warrant is being exercised multiplied by (y) a fraction, the
numerator of which is the Market Price (as herein defined) of the Common
Stock less the Exercise Price (as herein defined) and the denominator of
which is such Market Price. Solely for the purposes of this paragraph (2),
Market Price shall be calculated either (i) on the date on which the
Purchase Form attached hereto is deemed to have been sent to the Company
pursuant to paragraph (1) hereof
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("Notice Date") or (ii) as the average of the Market Price for each of the
fifteen trading days preceding the Notice Date, whichever of (i) or (ii) is
greater.
(b) NO IMPAIRMENT. The Company hereby agrees that (i) at all times there
shall be reserved for issuance and delivery upon exercise of this Warrant such
number of shares of its Common Stock as shall be required for issuance and
delivery upon exercise of this Warrant, and (ii) it will take all action as may
be necessary in order that all shares of stock as may be issued pursuant to this
Warrant shall, upon issuance, be duly and validly issued, fully paid,
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof.
(c) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, after
payment of the Exercise Price for such fractional share by the Holder, the
Company shall round the number of shares issued upon the exercise of this
Warrant to the next highest full share.
(d) ASSIGNMENT OF WARRANT OR WARRANT STOCK OR LOSS OF WARRANT.
(1) This Warrant may not be sold, transferred, assigned or
hypothecated at any time after its execution and delivery, except upon
compliance with the requirements of this Warrant and any applicable state
or federal securities laws. Shares of Common Stock issued pursuant to this
Warrant shall be subject to the same holding period as shares of Common
Stock issued upon conversion of the Note, which holding period is
described in the Purchase Agreement [IS THE HOLDING PERIOD DESCRIBED IN
THE PURCHASE AGREEMENT?].
(2) Any sale, assignment, transfer or hypothecation of this Warrant
shall be made by surrender of this Warrant to the Company or at the office
of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and accompanied with funds sufficient to pay any
transfer tax; whereupon, the Company shall, after first receiving such
evidence as the Company may reasonably require as to compliance with this
Warrant, without charge, execute and deliver a new Warrant in the name of
the assignee named in such instrument of assignment and this Warrant shall
promptly be canceled.
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(3) The term "Warrant" as used herein includes any Warrant issued in
substitution for or replacement of this Warrant. Upon receipt by the
Company of evidence of the loss, theft, destruction or mutilation of this
Warrant, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will at its expense execute and deliver a new
Warrant of like tenor and date. When authorizing the execution and
delivery of a new Warrant to replace a Warrant lost, stolen or destroyed,
the Board of Directors of the Company may, in its sole discretion and as a
condition precedent thereto, require the Holder to deliver an affidavit in
a form satisfactory to the Board of Directors of the Company and to
indemnify the Company against any claim that may be made against the
Company with respect to such lost, stolen or destroyed Warrant.
(e) ANTI-DILUTION AND ADJUSTMENT PROVISIONS. The purchase price per share
of Common Stock from time to time in effect under this Warrant, and the number
and character of shares covered hereby, shall be subject to adjustments from
time to time in certain instances as follows, and the term "Exercise Price"
shall mean the price per share originally set forth in this Warrant or any price
resulting from adjustments pursuant to the terms hereof.
(1) In case the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares or shall issue in exchange
for its outstanding shares of Common Stock a greater number of shares of
Common Stock, then in each such case from and after the record date for
such subdivision or exchange, the number of shares of Common Stock covered
by this Warrant shall be increased in proportion to such increase in the
number of outstanding shares of Common Stock and the Exercise Price then
in effect shall be correspondingly decreased; and in the case the Company
shall reduce the number of shares of its Common Stock by a combination of
shares or shall issue in exchange for its outstanding shares of Common
Stock a lesser number of shares of Common Stock, then in each such case
from and after the record date for such combination or exchange, the
number of shares of Common Stock covered by this Warrant shall be
decreased in proportion to such reduction in the number of outstanding
shares of Common Stock, and the then prevailing Exercise Price shall be
correspondingly increased.
(2) In case the Company shall declare and pay a dividend upon its
Common Stock payable in Common Stock, then in each such case from and
after the record date for determining the stockholders entitled to receive
such dividend, the number of shares of Common Stock covered by this
Warrant shall be increased in proportion to the increase in the number of
outstanding shares of Common Stock through such stock dividend, and the
then prevailing Exercise Price shall be correspondingly decreased.
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(3) In case of any reclassification or change of
outstanding shares of Common Stock (other than as a result of a
subdivision, combination or stock dividend) or in case of the
consolidation or merger of the Company with or into any other corporation
(other than a merger in which the Company is the continuing corporation
and which does not result in any reclassification or change in its
outstanding shares of Common Stock), or in case of any sale by the Company
of all or substantially all of its assets to another corporation, the
Holder shall have the right thereafter to receive upon exercise of this
Warrant the amount and kind of shares of capital stock and other
securities and property entitled to be received upon such
reclassification, change, consolidation, merger or sale by a holder of the
number of shares of Common Stock of the Company covered by this Warrant at
the then prevailing Exercise Price, subject to subsequent adjustments as
provided herein.
(f) NUMBER OF SHARES. This Warrant may be exercised for the number of
shares of Common stock equal to:
X = A X B
C
A = 15% if the Next Qualified Equity Financing has occurred on
or before June__, 1999; 20% if the Next Qualified Equity Financing has occurred
after June __, 1999, but on or before July __, 1999; 30% if the Next Qualified
Equity Financing has occurred after July __, 1999, but on or before August __,
1999; 40% if the Next Qualified Equity Financing has occurred after August __,
1999, but on or before September __, 1999; 50% if the Next Qualified Equity
Financing has occurred after September __, 1999 but on or before October __,
1999; and 60% if the Next Qualified Equity Financing has occurred after October
__, 1999.
B = Original principal amount of Note.
C = The per share value of each share of the Company's Common
Stock sold at the Next Qualified Equity Financing.
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X = The number of shares of the Company's Common Stock for which
this Warrant (together with payment of the exercise price) is exercisable.
(g) NOTICES TO HOLDER. So long as this Warrant shall be outstanding and
unexercised (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock, or (ii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then, in any such case, the Company shall
cause to be delivered to the Holder, at least ten days prior to the date
specified in (x) and at least thirty days prior to the date specified in (y)
below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution or rights, or (y) such
reclassification reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and at least twenty days
prior notice as to the date, if any is to be fixed, as of which the holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation, or
winding up.
(h) TRANSFER TO COMPLY WITH THE SECURITIES ACT.
(1) This Warrant or the Warrant Stock or any other security issued or
issuable upon exercise of this Warrant may not be offered or sold except
in conformity with the Securities Act, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with
the provisions of this Section (h) with respect to any resale or other
disposition of such securities.
(2) The Company may cause the legends set forth at the top of the
first page hereof to be set forth on each Warrant and the following
legends to be set forth on each certificate representing Warrant Stock,
unless counsel for the Company is of the opinion as to any such
certificate that such legend is unnecessary:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
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LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED
EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO THE CORPORATION OF
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.
(i) APPLICABLE LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
(j) NOTICE. Any notices or certificates by the Company to the Holder and
by the Holder to the Company shall be deemed delivered if in writing and
delivered personally or five (5) days after being sent by certified mail or
registered mail, return receipt requested, to the Holder. For purposes hereof,
the address of the Holder shall be Xxxx Xxxxxxxxxxxxxx 0, X-0000 leper, Belgium,
Attention: Chief Operating Officer, and the address of the Company shall be 0000
Xxxx Xxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attention: Chief Executive
Officer; provided, however, either address may be changed by notice given in
accordance herewith.
(k) NONWAIVER. No course of dealing or any delay or failure to exercise
any right, power or remedy hereunder on the part of the Holder hereof shall
operate as a waiver of or otherwise prejudice such Holder's rights, powers or
remedies.
(l) HOLDER NOT A STOCKHOLDER. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder hereof shall not, by virtue of its ownership
of this Warrant, except as specifically provided herein, be entitled to any of
the rights of a stockholder of the Company including, without limitation, the
right as a stockholder to (a) vote on or consent to any proposed action of the
Company or (b) receive notice of or attend any meetings of stockholders of the
Company or notice of any other proceedings of the Company.
(m) SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Company, the Holder hereof and the Holder of the shares of Common Stock
issued upon the exercise hereof, and shall be enforceable by any such Holder.
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IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS WARRANT TO BE
EXECUTED EFFECTIVE AS OF MAY __, 1999.
APPLIED VOICE RECOGNITION, INC.
By: ____________________________
Xxxxxxx X. Xxxxxxxx, Chief
Executive Officer
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PURCHASE FORM
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase rights represented by said Warrant for, and to
purchase thereunder, ________ shares of Common Stock, $0.001 par value per
share, of Applied Voice Recognition, Inc. and herewith makes payment of
$___________ in cash therefor and requests that the certificates for such shares
be issued in the name of _________________________________________ and delivered
to ____________________________________, whose address is
_____________________________________________________ and, if such shares shall
not be all of the shares purchasable hereunder, that a new Warrant of like tenor
for the balance of the shares purchasable hereunder be delivered to the
undersigned.
Dated: _________________ ___________________________________
Name:______________________________
Title:_____________________________
Address: __________________________
__________________________
__________________________
Social Security
or Tax I.D. No. ___________________
SCHEDULE A-1
ASSIGNMENT IN FULL
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto _______________________________ the within Warrant
and all rights evidenced thereby and does irrevocably constitute and appoint
______________________________, attorney, to transfer the said Warrant on the
books of the within named Company.
Dated: _________________ _________________________________
_________________________________
Address: ________________________
________________________
________________________
Social Security
or Tax I.D. No. ___________________
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PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto ________________________________ a portion of the
within Warrant and the rights evidenced thereby, TO WIT: the right to purchase
______ shares of Common Stock of __________________________ and does irrevocably
constitute and appoint _________________________, attorney, to transfer to such
extent the said Warrant on the books of the within named Corporation.
Dated: _________________ _________________________________
_________________________________
Address: ________________________
________________________
________________________
Social Security
or Tax I.D. No. ___________________
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