Contract
Exhibit 10.3
THIS NOTE AND THE RIGHTS PROVIDED HEREIN ARE SUBJECT IN ALL RESPECTS TO THE TERMS OF THE SECOND
AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE AGENT OF THE PAYEE
AND SAND HILL FINANCE, LLC.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL
HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
AXS-ONE INC.
SERIES E 6% SECURED CONVERTIBLE PROMISSORY NOTE
U.S. $______________
|
Rutherford, NJ | |
No.: PN-2008-E-____
|
October 30, 2008 |
FOR VALUE RECEIVED, the undersigned, AXS-ONE INC., a Delaware corporation (the
“Company”), hereby promises to pay to the order of __________________
or any future
holder of this promissory note (the “Payee”), at the principal office of the Payee set
forth herein, or at such other place as the holder may designate in writing to the Company, the
principal sum of [Amount] (U.S. $________), or such other amount as may be outstanding hereunder
(the “Principal Amount”), together with all accrued but unpaid interest, in such coin or
currency of the United States of America as at the time shall be legal tender for the payment of
public and private debts and in immediately available funds, as provided in this promissory note
(the “Note”).
This Note is one of a duly authorized issue of Series E 6% Secured Convertible Promissory
Notes of the Company, in aggregate principal amount of One Million One Hundred Thousand Dollars
($1,100,000) (collectively, the “Promissory Notes”) issued pursuant to the Convertible Note
and Warrant Purchase Agreement dated as of October 30, 2008 (the “Purchase Agreement”;
capitalized terms used herein without definition shall have the meanings assigned in the Purchase
Agreement). The Promissory Notes rank pari passu in priority of payment and in all other respects
with one another, as well as with (i) all of the Series A 6% Secured Convertible Promissory Notes
and the Series B 6% Secured Convertible Promissory Notes sold and issued by the Company for the
aggregate amount of $5,000,000 on May 29, 2007, pursuant to a Convertible Note and Warrant Purchase
Agreement (the “May 2007 Notes”), (ii) all of the
Series C 6% Secured Convertible Promissory Notes sold and issued by the Company for the
aggregate amount of $3,750,000 on November 16, 2008, pursuant to a Convertible Note and Warrant
Purchase Agreement (the “November 2007 Notes”) and (iii) all of the Series D 6% Secured
Convertible Promissory Notes sold and issued by the Company for the aggregate amount of $2,100,000
on July 24, 2008, pursuant to a Convertible Note and Warrant Purchase Agreement (the “July 2008
Notes”).
No payment, including any prepayment, shall be made hereunder unless payment, including any
prepayment, is offered with respect to the other Promissory Notes in an amount which bears the same
ratio to the then unpaid principal amount of such Promissory Notes as the payment made hereon bears
to the then unpaid principal amount under this Note.
1. Principal and Interest Payments.
(a) The Company shall repay in full the entire principal balance then outstanding under this
Note plus all accrued and unpaid interest on the first to occur (the “Maturity Date”) of:
(i) May 29, 2009; (ii) such time as there occurs a Sale Transaction (as defined below) or (iii) the
acceleration of the obligations as contemplated by this Note.
“Sale Transaction” shall mean (i) the sale or other disposition of all or
substantially all of the Company’s assets, or (ii) the acquisition of the Company by another entity
by means of any transaction or series of related transactions to which the Company is party
(including, without limitation, any stock acquisition, reorganization, merger or consolidation but
excluding any sale of stock for capital raising purposes) other than a transaction or series of
transactions in which the holders of the voting securities of the Company outstanding immediately
prior to such transaction continue to retain (either by such voting securities remaining
outstanding or by such voting securities being converted into voting securities of the surviving
entity), as a result of shares in the Company held by such holders prior to such transaction, at
least fifty percent (50%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such transaction or series of
transactions.
(b) Interest on the outstanding principal balance of this Note shall accrue at a rate of six
percent (6.00%) per annum, compounded quarterly. Interest on the outstanding principal balance of
this Note shall be computed on the basis of the actual number of days elapsed and a year of three
hundred sixty (360) days and shall be payable on the Maturity Date, upon earlier prepayment of this
Note or in the form of shares of common stock, par value $0.01 per share, of the Company (the
“Common Stock”) upon conversion of this Note as set forth in Section 8 below. Furthermore,
upon the occurrence and during the continuance of an Event of Default, then to the extent permitted
by law, the Company will pay interest to the Payee, payable on demand, on the outstanding principal
balance of this Note from the date of the Event of Default until cure thereof or payment in full,
at a per annum rate equal to the lower of (i) five percent (5%) above the rate charged or then
eligible to be charged by Sand Hill Finance, LLC or any other senior lender to the Company, or (ii)
the maximum rate permitted by law, in either case compounded quarterly.
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(c) The Company may not prepay the outstanding principal amount of this Note or the interest
thereon prior to the Maturity Date (a “Prepayment”) without the written consent of the
Payee, unless the Company shall provide at least thirty (30) days prior written notice of the date
on which the Company intends to make such Prepayment (a “Prepayment Notice”). Any partial
Prepayment shall be applied first to accrued but unpaid interest and second to unpaid principal.
Nothing in this Section 1(c) shall limit the right of the Payee to convert this Note into Common
Stock at any time after receipt of the Prepayment Notice and prior to the time at which such
Prepayment is made.
2. Non-Business Days. Whenever any payment to be made shall be due on a non-Business
Day, such payment may be due on the next succeeding Business Day and such next succeeding day shall
be included in the calculation of the amount of accrued interest payable on such date.
3. Security. This Note is secured pursuant to the terms of a Security Agreement dated
as of May 29, 2007 between the Company and the other parties set forth therein as amended pursuant
to a Security Agreement Amendment dated as of November 16, 2007, a Second Security Agreement
Amendment dated as of July 24, 2008 and a Third Security Agreement Amendment dated as of October
30, 2008 between the Company and the holders of the Promissory Notes (such Security Agreement, as
amended, the “Security Agreement”) by a security interest in the Collateral (as such term
is defined in the Security Agreement), which security interest will rank pari passu with the
security interests granted in connection with the May 2007 Notes, the November 2007 Notes and the
July 2008 Notes. This Note is subject to the provisions of the Security Agreement.
4. Subordination of Future Debt; Payment of Dividends. Except as provided in the
Transaction Documents, any debt incurred after the date hereof to any creditor shall be
subordinated to the indebtedness evidenced by this Note. The Company shall not declare or pay any
dividend or distribution with respect to any preferred stock or Common Stock of the Company other
than a pro rata dividend with respect to the Common Stock payable solely in shares of Common Stock.
5. Representations and Warranties of the Company. The Company represents and warrants
to the Payee as follows:
(a) The Company has been duly incorporated and is validly existing and in good standing under
the laws of the state of Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as currently conducted.
(b) This Note has been duly authorized, validly executed and delivered on behalf of the
Company and is a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, subject to limitations on enforcement by general principles of equity
and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and the
Company has full power and authority to execute and deliver this Note and to perform its
obligations hereunder.
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6. Events of Default. The occurrence of any of the following events shall be an
“Event of Default” under this Note:
(a) the Company shall fail to pay the principal or any accrued interest hereunder, or under
any other Note, the May 2007 Notes, the November 2007 Notes or the July 2008 Notes after the date
such payment shall become due and payable hereunder or thereunder; or
(b) if default shall be made in the performance or observance of any representation, warranty,
covenant, or agreement contained in this Note, in the Security Agreement, in the Purchase
Agreement, in the Investor Rights Agreement, in any other Note, in any May 2007 Note, in any
November 2007 Note, in any July 2008 Note, or in any other agreement between the Company and the
Payee relating to indebtedness of the Company to the Payee or any of its affiliates for borrowed
money and such default shall have continued for a period of five (5) days after Company’s receipt
of written notice of such default (unless such default is on account of failure to give a required
notice, in which event such 5 day cure period shall commence with the date of such default); or
(c) the Company shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or assets, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the United States Bankruptcy Code (the “Bankruptcy
Code”) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or
other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under the Bankruptcy Code or under
the comparable laws of any jurisdiction (foreign or domestic), or (vi) take any action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or
(d) a proceeding or case shall be commenced in respect of the Company or any of its
subsidiaries without its application or consent, in any court of competent jurisdiction, seeking
(i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of it or of all or any substantial part of its assets or (iii) similar relief in respect
of it under any law providing for the relief of debtors, and such proceeding or case described in
clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of
thirty (30) consecutive days or any order for relief shall be entered in an involuntary case under
the Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or domestic) against
the Company or any of its subsidiaries or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the Company or any of
its subsidiaries and shall continue undismissed, or unstayed and in effect for a period of ninety
(90) consecutive days.
7. Remedies Upon an Event of Default. If an Event of Default shall have occurred and
shall be continuing, the Payee of this Note may at any time at its option, declare the
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entire unpaid principal balance of this Note, together with all interest accrued hereon, due
and payable, and thereupon, the same shall be accelerated and so due and payable; provided,
however, that upon the occurrence of an Event of Default described in (i) Sections 6(c) and
(d), without presentment, demand, protest, or notice, all of which are hereby expressly
unconditionally and irrevocably waived by the Company, the outstanding principal balance and
accrued interest hereunder shall be automatically due and payable, and (ii) Sections 6(a) and (b)
the Payee may exercise or otherwise enforce any one or more of the Payee’s rights, powers,
privileges, remedies and interests under this Note or applicable law. No course of delay on the
part of the Payee shall operate as a waiver thereof or otherwise prejudice the right of the Payee.
No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
8. Conversion.
(a) General. The holder of this Note shall have the right at any time, at such
holder’s option, to convert all or any lesser portion of the Principal Amount plus accrued and
unpaid interest thereon into such number of fully paid and non-assessable shares of Common Stock as
is determined by dividing (i) the portion of the Principal Amount to be converted plus accrued and
unpaid interest thereon by (ii) the Conversion Rate (as defined below) then in effect for this
Note. The initial conversion rate shall be $1.00, such rate to be subject to adjustment in
accordance with the provisions of this Section 8. Such conversion rate in effect from time to time,
as adjusted pursuant to this Section 8, is referred to herein as a “Conversion Rate.” All
of the remaining provisions of this Section 8 shall apply separately to each Conversion Rate in
effect from time to time with respect to this Note.
(b) Mechanics of Conversion.
(i) Such right of conversion shall be exercised by the Payee by delivering to the Company a
conversion notice in the form attached hereto as Exhibit A (the “Conversion
Notice”), appropriately completed and duly signed, and by surrender not later than two (2)
Business Days thereafter of this Note. The Conversion Notice shall also contain a statement of the
name or names (with addresses and tax identification or social security numbers) in which the
certificate or certificates for Common Stock shall be issued, if other than the name in which this
Note is registered. Promptly after the receipt of the Conversion Notice, the Company shall issue
and deliver, or cause to be delivered, to the Payee or such Payee’s nominee, a certificate or
certificates for the number of shares of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected as of the close of business on the date of receipt
by the Company of the Conversion Notice (the “Conversion Date”), and the person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all
purposes as the holder or holders of record of such shares of Common Stock as of the close of
business on the Conversion Date. If the Payee has not converted the entire amount of this Note
pursuant to the Conversion Notice, then the Company shall execute and deliver to the Payee a new
Note instrument identical in terms to this Note, but with a principal amount reflecting the
unconverted portion of this Note. The new Note instrument shall be delivered subject to the same
timing terms as the certificates for the Common Stock.
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(ii) The Company shall effect such issuance of Common Stock within three (3) trading days
following the Conversion Date and shall transmit the certificates by messenger or reputable
overnight delivery service to reach the address designated by such holder within three (3) trading
days after the receipt by the Company of such Conversion Notice. Provided that the holder complies
with all of the provisions of this Note relating to the conversion hereof, if certificates
evidencing the Common Stock are not received by the holder (through no fault or negligence of the
holder) within five (5) Business Days following the Conversion Date, then the holder will be
entitled to revoke and withdraw its Conversion Notice, in whole or in part, at any time prior to
its receipt of those certificates.
(d) Fractional Shares. The Company shall not be required to issue a fractional share
of Common Stock upon conversion of this Note. As to any fraction of a share which the holder of
this Note would otherwise be entitled to acquire upon such conversion, the Company shall pay an
amount in cash equal to the Current Market Price (as defined below) per share of Common Stock on
the date of conversion, multiplied by such fraction.
“Current Market Price” means, in respect of any share of Common Stock on any date
herein specified:
(1) if there shall not then be a public market for the Common Stock, the higher
of (a) the book value per share of Common Stock at such date, and (b) the fair
market value per share of Common Stock as determined in good faith by the Board, or
(2) if there shall then be a public market for the Common Stock, the average of
the daily market prices for the 20 consecutive trading days immediately before such
date. The daily market price for each such trading day shall be (i) the closing bid
price on such day on the principal stock exchange (including Nasdaq) on which such
Common Stock is then listed or admitted to trading, or quoted, as applicable, (ii)
if no sale takes place on such day on any such exchange, the last reported closing
bid price on such day as officially quoted on any such exchange (including Nasdaq),
(iii) if the Common Stock is not then listed or admitted to trading on any stock
exchange, the last reported closing bid price on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers Automatic
Quotation System or the Pink Sheets LLC, (iv) if neither such corporation at the
time is engaged in the business of reporting such prices, as furnished by any
similar firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the National Association of Securities Dealers, Inc. (the
“NASD”) selected mutually by holders of a majority in interest of the
Promissory Notes and the Company or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall be selected by holders
of a majority in interest of the Promissory Notes and one of which shall be selected
by the Company (as applicable, the “Daily Market Price”).
(e) Stock Dividends, Subdivisions and Combinations. If at any time while
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this Note is outstanding, the Company shall:
(i) cause the holders of its Common Stock to be entitled to receive a dividend payable
in, or other distribution of, additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger number of shares of
Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,
then in each such case the Conversion Rate shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this
Section 8(e) shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to
clauses (ii) or (iii) of this Section 8(e) shall become effective immediately after the effective
date of such subdivision or combination. If any event requiring an adjustment under this paragraph
occurs during the period that a Conversion Rate is calculated hereunder, then the calculation of
such Conversion Rate shall be adjusted appropriately to reflect such event.
(f) Certain Other Distributions. If at any time while this Note is outstanding the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of stock of any class or any other
securities or property or assets of any nature whatsoever (other than cash or additional
shares of Common Stock as provided in Section 8(e) hereof), or
(iii) any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property or assets
of any nature whatsoever (in each case set forth in subparagraphs 8(f)(i), 8(f)(ii) and
8(f)(iii) hereof, the “Distributed Property”),
then upon any conversion of this Note that occurs after such record date, the holder of this Note
shall be entitled to receive, in addition to the Conversion Shares, the Distributed Property that
such holder would have been entitled to receive in respect of such number of Conversion Shares had
the holder been the record holder of such Conversion Shares as of such record date. Such
distribution shall be made whenever any such conversion is made. In the event that the Distributed
Property consists of property other than cash, then the fair value of such Distributed Property
shall be as determined in good faith by the Board and set forth in reasonable detail in a written
valuation report (the “Valuation Report”) prepared by the Board. The Company shall
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give written notice of such determination and a copy of the Valuation Report to the holder of this
Note, and if the holder objects to such determination within twenty (20) Business Days following
the date such notice is given, the Company shall submit such valuation to an investment banking
firm of recognized national standing selected by the holder of this Note and acceptable to the
Company in its reasonable discretion, whose opinion shall be binding upon the Company and the
holder of this Note. A reclassification of the Common Stock (other than a change in par value, or
from par value to no par value or from no par value to par value) into shares of Common Stock and
shares of any other class of stock shall be deemed a distribution by the Company to the holders of
its Common Stock of such shares of such other class of stock within the meaning of this Section
8(f) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of Common Stock within
the meaning of Section 8(e).
(g) Common Stock Reserved. The Company shall at all times reserve and keep available
for issuance upon the conversion of the Promissory Notes, such number of its authorized but
unissued shares of Common Stock as shall from time to time be issuable upon the conversion of all
Promissory Notes at the time outstanding.
9. Other Provisions Applicable to Adjustments. The following provisions shall be
applicable to the making of adjustments of the number of shares of Common Stock into which this
Note is convertible and the current Conversion Rate provided for in Section 8:
(a) When Adjustments to Be Made. The adjustments required by Section 8 shall be made
whenever and as often as any specified event requiring an adjustment shall occur, except that any
adjustment to the Conversion Rate that would otherwise be required may be postponed (except in the
case of a subdivision or combination of shares of the Common Stock, as provided for in Section
8(e)) up to, but not beyond the Conversion Date if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock into
which this Note is convertible immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as aforesaid) which is postponed
shall be carried forward and made as soon as such adjustment, together with other adjustments
required by Section 8 and not previously made, would result in a minimum adjustment or on the
Conversion Date. For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(b) Fractional Interests. In computing adjustments under Section 8, fractional
interests in Common Stock shall be taken into account to the nearest 1/100th of a share.
(c) When Adjustment Not Required. If the Company undertakes a transaction contemplated
under Section 8(f) and as a result takes a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution or subscription or purchase rights
or other benefits contemplated under Section 8(f) and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights or other benefits contemplated under Section 8(f),
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then thereafter no adjustment shall be required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall be rescinded and annulled.
(d) Escrow of Stock. If after any property becomes distributable pursuant to Section 8
by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, a holder of this Note converts this Note during such
period, the holder of this Note shall continue to be entitled to receive any shares of Common Stock
issuable upon conversion under Section 8 by reason of such adjustment (as if this Note were not yet
converted) and such shares or other property shall be held in escrow for the holder of this Note by
the Company to be issued to holder of this Note upon and to the extent that the event actually
takes place. Notwithstanding any other provision to the contrary herein, if the event for which
such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled
by the Company and escrowed property returned to the Company.
10. Replacement. Upon receipt of a duly executed, notarized and unsecured written
statement from the Payee with respect to the loss, theft or destruction of this Note (or any
replacement hereof), and, if requested by the Company, an indemnity bond customary in the industry,
or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the
Company shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed
or mutilated Note.
11. Parties in Interest, Transferability. This Note shall be binding upon the Company
and its successors and permitted assigns and the terms hereof shall inure to the benefit of the
Payee and its successors and assigns. This Note may be transferred or sold, subject to the
provisions of Section 19 of this Note, or pledged, hypothecated or otherwise granted as security by
the Payee.
12. Amendments. This Note may not be modified or amended in any manner except in
writing executed by the Company and the Payee.
13. Notices. Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery
by telecopy or facsimile at the address or number designated below (if delivered on a Business Day
during normal business hours where such notice is to be received), or the first Business Day
following such delivery (if delivered other than on a Business Day during normal business hours
where such notice is to be received) or (b) on the second Business Day following the date of
mailing by express courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The Company will give written notice to the
Payee at least twenty (20) days prior to the date on which dissolution, liquidation or winding-up
will take place and in no event shall such notice be provided to the Payee prior to such
information being made known to the public. Notices to the Payee shall be made to the address set
forth in the Purchase Agreement. Notices to the Company shall be made to the following:
Address of the Company:
|
AXS-One Inc. | |
| 000 Xxxxx 00 Xxxxx |
0
| Xxxxxxxxxx, Xxx Xxxxxx 00000 | ||
| Attention: Chief Financial Officer | ||
| Facsimile No.: (000) 000-0000 | ||
with a copy to:
|
Xxxxxx and Xxxx LLP | |
| 000 Xxxxxxxx Xxxxxx | ||
| Xxxxxxxx, Xxxxxxxxxxx 00000 | ||
| Attention: Xxxxxxx Xxxxxxx | ||
| Facsimile No.: (000) 000-0000 |
14. Governing Law. This Note shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to the choice of law provisions.
This Note shall not be interpreted or construed with any presumption against the party causing this
Note to be drafted.
15. Headings. Article and section headings in this Note are included herein for
purposes of convenience of reference only and shall not constitute a part of this Note for any
other purpose.
16. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.
The remedies provided in this Note shall be cumulative and in addition to all other remedies
available under this Note, at law or in equity (including, without limitation, a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein shall limit a Payee’s
right to pursue actual damages for any failure by the Company to comply with the terms of this
Note. Amounts set forth or provided for herein with respect to payments and the like (and the
computation thereof) shall be the amounts to be received by the Payee and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable and material harm to the Payee and that the remedy at law for any such breach may be
inadequate. Therefore the Company agrees that, in the event of any such breach or threatened
breach, the Payee shall be entitled, in addition to all other available rights and remedies, at law
or in equity, to such equitable relief, including but not limited to an injunction restraining any
such breach or threatened breach, without the necessity of showing economic loss and without any
bond or other security being required.
17. Failure or Indulgence Not Waiver. No failure or delay on the part of the Payee in
the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
18. Enforcement Expenses. The Company agrees to pay all costs and expenses of
enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses.
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19. Compliance with Securities Laws. The Payee of this Note acknowledges that this
Note is being acquired solely for the Payee’s own account and not as a nominee for any other party,
and for investment, and that the Payee shall not offer, sell or otherwise dispose of this Note
other than in compliance with the laws of the United States of America and as guided by the rules
of the Securities and Exchange Commission. This Note and any Note issued in substitution or
replacement therefore shall be stamped or imprinted with legends, as applicable, in substantially
the following form:
“THIS NOTE AND THE RIGHTS PROVIDED HEREIN ARE SUBJECT IN ALL
RESPECTS TO THE TERMS OF THE SECOND AMENDED AND RESTATED
SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE AGENT OF
THE PAYEE AND SAND HILL FINANCE, LLC.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.”
20. Severability. The provisions of this Note are severable, and if any provision
shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall not in any manner affect such provision in any other
jurisdiction or any other provision of this Note in any jurisdiction.
21. Consent to Jurisdiction. Each of the Company and the Payee (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the Southern District of
New York and the courts of the State of New York located in New York county for the purposes of any
suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the
Company and the Payee consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address set forth in Section 13 hereof and agrees that
such service shall constitute good and sufficient service of process and notice thereof. Nothing
in this Section 21 shall affect or limit any right to serve process in any other manner permitted
by law.
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22. Company Waivers.
(a) Except as otherwise specifically provided herein, the Company and all others that may
become liable for all or any part of the obligations evidenced by this Note, hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to
any number of renewals of extensions of the time or payment hereof and agree that any such renewals
or extensions may be made without notice to any such persons and without affecting their liability
herein and do further consent to the release of any person liable hereon, all without affecting the
liability of the other persons, firms or Company liable for the payment of this Note, AND DO HEREBY
WAIVE TRIAL BY JURY.
(b) No delay or omission on the part of the Payee in exercising its rights under this Note, or
course of conduct relating hereto, shall operate as a waiver of such rights or any other right of
the Payee, nor shall any waiver by the Payee of any such right or rights on any one occasion be
deemed a waiver of the same right or rights on any future occasion.
(c) THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND
HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE PAYEE OR ITS SUCCESSORS OR ASSIGNS MAY
DESIRE TO USE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has executed and delivered this Promissory Note as of the date
first written above.
| AXS-ONE INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
13
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the registered holder in order to convert the Note)
The undersigned hereby irrevocably elects to convert the Series E 6% Secured Convertible Promissory
Note (the “Note”) of AXS-One Inc., a Delaware corporation (the “Company”), due May
29, 2009 held by the undersigned into shares of Common Stock, according to the terms and conditions
of the Note and the conditions hereof, as of the date written below. The undersigned hereby
requests that certificates for the shares of Common Stock to be issued to the undersigned pursuant
to this Conversion Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. If the shares of Common Stock are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. A copy of the Note being converted is attached hereto (and the original Note shall be
transmitted to the Company pursuant to the terms thereof). All capitalized terms used in this
Conversion Notice, but not otherwise defined herein shall have the meanings assigned in the Note.
| Conversion Information: [NAME OF HOLDER] | ||
Address of Holder: |
||
| Issue Common Stock to (if different than above): | ||
Name: ______________________________
Address: ___________________________
_____________________________
Tax ID #: ______________________
| Name of Holder | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
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