Exhibit 10.62
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
No. 1 U.S. $250,000.00 Original Issue Date: May 9, 2003
Holder: Barbell Group, Inc.
A Panama corporation
Address: Swiss Tower, 16th Floor
00xx X Xxxxxx, Xxx. Marbella
POB 0832-00232, World Trade Center
Panama, Rep. of Panama
SERIES 2003A 7% CONVERTIBLE NOTE DUE JUNE 9, 2004
THIS Note the duly authorized Note of INVISA, INC., a Nevada
corporation, having a principal place of business at 0000 Xxxxxxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxx 00000 (the "Company"), designated as its Series 2003A 7%
Convertible Notes, due June 9, 2004 (the "Note"), in the principal amount of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00). This Note is acquired
by the Holder (as defined herein) pursuant to the terms of that certain
Financing Agreement dated as of the Original Issue Date (as defined herein),
between the Company and the Holder, as amended, modified or supplemented from
time to time in accordance with its terms ("Financing Agreement").
FOR VALUE RECEIVED, the Company promises to pay to the Holder or
registered assigns, the principal sum of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00), on or before June 9, 2004 (the "Maturity Date") and to
pay interest to the Holder on the principal sum at the rate of 7% per annum,
which interest shall be due and payable on the earlier of the Conversion Date
(with respect to the principal amount converted) or the Maturity Date. Interest
shall accrue daily commencing on the Original Issue Date (as defined in Section
6) until payment in full of the principal sum, together with all accrued and
unpaid interest and other amounts which may become due hereunder, has been made.
Interest shall be calculated on the basis of a 360-day year and for the actual
number of days elapsed. Interest hereunder will be paid to the person in whose
name this Note (or one or more predecessor or successor Notes) is registered on
the records of the Company regarding registration and transfers of the Notes
(the "Note Register"). All overdue principal, accrued and unpaid interest and
other amounts due hereunder shall bear interest at the rate of 18% per annum
from the day such interest is due hereunder through and including the date of
payment. The principal of, and interest on, this Note are payable in such
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coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts, at the address of the
Holder last appearing on the Note Register, except that the Company may, at the
Company's option and at any time, pay the principal amount due (but not the
interest due) in shares of the Company's Common Stock (as defined in Section 6)
calculated based upon the Conversion Price (as defined below). The Company shall
provide the Holder written notice of its intention to pay amounts hereunder in
cash or shares not less than five (5) Trading Days (as defined in Section 6)
prior to the Maturity Date. Except as otherwise provided herein, if at any time
the Company pays less than the total amount of interest then accrued on account
of the Note, such payment shall be distributed ratably among the Holders, if
there is more than one Holder, based upon the aggregate principal amount of
Notes held by each Holder. If the Company pays this Note wholly or partially in
cash and not by issuing shares, in addition to all accrued and unpaid interest
and other charges due hereunder, the Company shall pay a premium of 15% of the
principal amount of this Note which is paid in cash.
Notwithstanding anything to the contrary contained herein, the Company
may not prepay any portion of this Note by issuing shares of its Common Stock
unless (i) upon issuance such shares will be legally and validly issued,
fully-paid, and non-assessable; and (ii) such shares are registered for resale
pursuant to an effective Registration Statement (as defined in Section 6) and
(iii) such shares are listed or quoted for trading on an "Authorized Market" (as
defined in Section 6). Notwithstanding anything to the contrary contained
herein, the Company may not prepay any portion of this Note by issuing shares of
its Common Stock if the issuance of such shares would result in a violation of
Section 4(a)(ii).
This Note is subject to the following additional provisions:
Section 1. The Notes are issuable in denominations of Five Thousand
Dollars ($5,000.00). The Notes are exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same but shall not be issuable in denominations of less
than integral multiples of Five Thousand Dollars ($5,000) unless such amount
represents the full principal balance of Notes outstanding to such Holder. No
service charge will be made for such registration of transfer or exchange.
Section 2.
(a) This Note may not be sold, transferred, assigned,
hypothecated or divided into two or more Notes of smaller denominations, nor may
any Underlying Shares be transferred, sold, assigned or hypothecated except in
accordance with this Section. The Holder, by acceptance hereof, agrees to give
written notice to the Company before transferring this Note or transferring any
Underlying Shares; such notice will describe briefly the any proposed transfer
and will give the Company the name, address, and tax identification number of
the proposed transferee, and will further provide the Company with an opinion of
the Holder's counsel that such transfer can be accomplished in accordance with
federal and applicable state securities laws (unless such transaction is
permitted by the plan of distribution in an effective Registration Statement).
Promptly upon receiving such written notice, the Company shall present copies
thereof to the Company's counsel.
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(i) If in the opinion of such counsel the proposed transfer may be
effected without registration or qualification (under any federal or
state securities laws), the Company, as promptly as practicable, shall
notify the Holder of such opinion, whereupon the Holder shall be
entitled to transfer this Note or to dispose of Underlying Shares
received upon the previous conversion of this Note, all in accordance
with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Note or the
certificates for such Underlying Shares respecting restrictions upon
transfer thereof necessary or advisable in the opinion of counsel and
satisfactory to the Company to prevent further transfers which would be
in violation of Section 5 of the Securities Act and applicable state
securities laws; and provided further that the prospective transferee
or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely
to comply with the exemptions relied upon by the Company for the
transfer or disposition of the Note or Underlying Shares.
(ii) If in the opinion of the counsel referred to in this Section 2,
the proposed transfer or disposition of this Note or such Underlying
Shares described in the written notice given pursuant to this Section 2
may not be effected without registration or qualification of this Note
or such Underlying Shares the Company shall promptly give written
notice thereof to the Holder, and the Holder will limit its activities
in respect to such as, in the opinion of such counsel, are permitted by
law provided further that if a Registration Statement with regard to
the Underlying Shares has been substantially prepared for filing the
Holder shall withdraw or defer any proposed transfer, or agree to a
modification of the Effective Date pursuant to the Registration Rights
Agreement (as defined in Section 6).
(b) Prior to transfer of this Note in compliance with this
Section 2, the Company and any agent of the Company may treat the person in
whose name this Note is duly registered on the Note Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note is overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
"Event of Default" wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of,
interest on or liquidated damages, or other obligations on conversion
in respect of, this Note, free of any claim of subordination, as and
when the same shall become due and payable, (whether on an Interest
Payment Date, Conversion Date or the Maturity Date or by acceleration
or otherwise);
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(ii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit
any breach of, this Note, the Financing Agreement, and such failure or
breach shall not have been remedied within 10 days after the date on
which notice of such failure or breach shall have been given, or the
Registration Rights Agreement (as defined in Section 6), including but
not limited to failure by the Company strictly to comply with the
requirements of Section 2(a);
(iii) the Company shall commence a voluntary case
under the United States Bankruptcy Code or insolvency laws as now or
hereafter in effect or any successor thereto (the "Bankruptcy Code");
or an involuntary case is commenced against the Company under the
Bankruptcy Code and the petition is not contested within 30 days, or is
not dismissed within 60 days, after commencement of such involuntary
case; or a "custodian" (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or any substantial part of the property of
the Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company
or there is commenced against the Company any such proceeding which is
not dismissed within 60 days; or the Company is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company suffers any appointment
of any custodian or the like for it or any substantial part of its
property which is not discharged or stayed for a period of 60 days; or
the Company makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is unable to pay
its debts generally as they become due;r the Company shall call a
meeting of all of its creditors with a view to arranging a composition
or adjustment of its debts; or the Company shall by any act or failure
to act indicate its consent to, approval of or acquiescence in any of
the foregoing; or any corporate or other action is taken by the Company
for the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its
obligations under any mortgage, credit agreement or other facility,
indenture, agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced any indebtedness
of the Company in an amount exceeding one hundred thousand dollars
($100,000), whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or
being declared due and payable prior to the date on which it would
otherwise become due and payable;
(v) the Common Stock shall fail to be listed or
authorized for quotation on an Authorized Market, or trading in an
Authorized Market has been suspended without the Common Stock having
been relisted or having such suspension lifted, as the case may be,
within five (5) Trading Days, or the closing bid price of the Common
Stock on any Trading Day shall be $1.00 or less;
(vi) the Company shall be a party to any Change of
Control Transaction (as defined in Section 6), shall agree to sell or
dispose of all or in excess of 49% of its
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assets (based on book value calculation as reflected in the Company's
most recent financial statements) in one or more transactions (whether
or not such sale would constitute a Change of Control Transaction), or
shall redeem more than a de minimis number of shares of Common Stock or
other equity securities of the Company (other than redemptions of
Underlying Shares);
(vii) an Event (as hereinafter defined) shall not
have been cured to the satisfaction of the Holder prior to the
expiration of thirty (30) days from the Event Date (as hereinafter
defined) relating thereto (other than as a result from a failure of a
Registration Statement to be declared effective by the Commission on or
prior to the Effective Date (as defined in the Registration Rights
Agreement)); or
(viii) the Company shall fail for any reason to
deliver Free Trading Certificates (as defined in Section 6) to a Holder
on or prior to the third (3rd) Trading Day after a Conversion Date, or
the Company shall provide notice to the Holder, including by way of
public announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms
hereof.
Section 4. Conversion.
(a) (i) This Note shall be convertible into shares of
Common Stock (subject to the limitation set forth in Section 4(a)(ii))
at the option of the Holder in whole or in part at any time and from
time to time and prior to the close of business on the Maturity Date.
The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by dividing the outstanding principal
amount of this Note to be converted by the Conversion Price, each as
subject to adjustment as provided hereunder. The Holder shall effect
conversions by delivering to the Company a conversion notice in the
form of conversion notice attached hereto as Exhibit A (the "Conversion
Notice"), specifying the information on the Conversion Notice form.
Each Conversion Notice shall specify the principal amount of Notes to
be converted and the date on which such conversion is to be effected,
which date may not be prior to the date of such Conversion Notice is
deemed to have been delivered pursuant to Section 4(h) (the "Conversion
Date"). If no Conversion Date is specified in a Conversion Notice, the
Conversion Date shall be the date that the Conversion Notice is deemed
delivered pursuant to Section 4(h). Subject to Section 4(b) hereof,
each Conversion Notice, once given, shall be irrevocable. If the Holder
is converting less than all of the principal amount represented by the
Note(s) tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the
Company shall honor such conversion and shall promptly deliver to such
Holder (in the manner and within the time set forth in Section 4(b)) a
new Note for such principal amount as has not been converted.
(ii) Certain Conversion Restrictions. The Holder
agrees not to convert Notes to the extent such conversion would result
in the Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in excess
of 4.999% of the then issued and outstanding shares of Common
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Stock, including shares issuable upon conversion of the Notes held by
such Holder after application of this Section. The Holder shall have
the sole authority and obligation to determine whether the restriction
contained in this Section applies and to the extent the Holder
determines that the restriction contained in this Section applies, the
determination of which portion of the principal amount of such Notes is
convertible shall be in the sole discretion of the Holder. The
provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 65 days prior
notice to the Company. Other Holders shall be unaffected by any such
waiver.
(b) (i) Not later than three (3) Trading Days after the
Conversion Date, the Company will deliver to the Holder a Free Trading
Certificate or certificates free of restrictive legends, trading
restrictions or stop transfer orders representing the number of shares
of the Common Stock being acquired upon the conversion of the Note(s),
and (ii) a corporate check in the amount of all accrued and unpaid
interest, together with all other amounts then due and payable in
accordance with the terms hereof, in respect of the Note(s) tendered
for conversion. The Company shall keep a register and log each
conversion of the Note(s) by entering the amount of the Note(s)
converted and the principal balance of the Note(s) once the conversion
has taken place. There shall be no obligation on the part of the Holder
to deliver the Notes with each conversion. Upon a final conversion of
the Notes, or payment by the Company of all amounts due under the
Notes, as the case may be, the Holder will surrender the original Notes
to the Company. Nothing stated herein shall preclude the Holder from
requesting from the Company Notes reflecting the principal balance
thereunder which shall be provided to the Holder simultaneously upon
the surrender of any Notes in the Holder's possession. The Company
shall, upon request of the Holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company
under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing
similar functions. If in the case of any Conversion Notice such Free
Trading Certificate or certificates, are not delivered to or as
directed by the applicable Holder by the third Trading Day after a
Conversion Date, the Holder shall be entitled by written notice to the
Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion.
(ii) If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section prior to the
third Trading Day after a Conversion Date, then the Company shall pay
to the Holder $150 per day for each day late in delivering the
certificates up to and including the 10th late day, and $500 per day
for each day late in delivering the Certificates after the 10th late
day ("Liquidated Damages"). Any Liquidated Damages incurred by the
Company shall be payable immediately and in cash upon demand in writing
made by the Holder, or their agent, to the Company.
(iii) Intentionally omitted.
(iv) In the event a Holder shall elect to convert a
Note or part thereof, the Company may not refuse conversion based on
any claim that such Holder or any one
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associated or affiliated with such Holder has been engaged in any
violation of law, or for any other reason, unless, an injunction from a
court, or notice, restraining and or enjoining conversion of all or
part of said Note shall have been sought and obtained and the Company
posts a surety bond for the benefit of such Holder in the amount of
130% of the amount of the Note, which is subject to the injunction,
which bond shall remain in effect until the completion of litigation of
the dispute and the proceeds of which shall be payable to such Holder
to the extent Holder obtains judgment.
(c) (i) The conversion price (the "Conversion Price") in
effect shall be 75% of the Market Price; and the term "Market Price"
means the Volume Weighted Average Price ("VWAP") as reported by
Bloomberg Financial Services for the 10 trading days of the Company's
common stock just prior to the date of the Notice of Conversion. If the
VWAP is not available through Bloomberg for any reason, then the VWAP
shall be the average of the bid prices of any market makers for the
Company's Common Stock as reported on the National Quotations Systems
Pink Sheets ("Pink Sheets") or as reported by the National Association
of Securities Dealers Electronic Bulletin Board ("OTC Bulletin Board"),
wherever such bid prices are available.
(ii) If the Company, at any time while any Notes are
outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of the
Common Stock, (b) subdivide outstanding shares of the Common Stock into
a larger number of shares, (c) combine outstanding shares of the Common
Stock into a smaller number of shares, or (d) issue by reclassification
of shares of the Common Stock any shares of capital stock of the
Company, the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of the
Common Stock outstanding after such event. Any adjustment made pursuant
to this Section 4(c)(ii) shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any Notes are
outstanding, shall issue rights or warrants to all holders of the
Common Stock (and not to Holders of Notes) entitling them to subscribe
for or purchase shares of the Common Stock at a price per share less
than the Conversion Price, the Conversion Price shall be multiplied by
a fraction, of which
the denominator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance
of such rights or warrants plus the number of additional shares of the
Common Stock offered for subscription or purchase, and
the numerator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance
of such rights or warrants plus the
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number of shares which the aggregate offering price of the total number
of shares so offered would purchase at the Conversion Price.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section 4(c)(iii), if any such right or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section 4 after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the basis of
offering for subscription or purchase only that number of shares of the Common
Stock actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If the Company, as applicable with respect to Common
Stock Equivalents (as defined below), at any time while this Note is
outstanding, shall issue shares of Common Stock or rights, warrants, options or
other securities or debt that is convertible into or exchangeable for shares of
Common Stock ("Common Stock Equivalents") entitling any Person to acquire shares
of Common Stock at a price per share less than the Conversion Price, then the
Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of shares of Common Stock
or such Common Stock Equivalents plus the number of shares of Common
Stock which the offering price for such shares of Common Stock or
Common Stock Equivalents would purchase at the Conversion Price, and
the denominator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock so issued or issuable,
provided, that for purposes hereof, all shares of Common Stock that are issuable
upon exercise or exchange of Common Stock Equivalents shall be deemed
outstanding immediately after the issuance of such Common Stock Equivalents.
Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued but shall be issued to the Holder on the same basis
as the other holders of Common Stock or Common Stock Equivalents.
(v) If the Company, at any time while Notes are outstanding,
shall distribute to all holders of the Common Stock (and not to Holders of
Notes) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which the Note(s) shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which
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the denominator shall be the Per Share Market Value of the Common Stock
determined as of the record date mentioned above, and
the numerator shall be such Per Share Market Value of the Common Stock
on such record date less the then fair market value at such record date
of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; provided, however,
that in the event of a distribution exceeding ten percent (10%) of the
net assets of the Company, such fair market value shall be determined
by a nationally recognized or major regional investment banking firm or
firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements
of the Company) (an "Appraiser") selected in good faith by the holders
of a majority in interest of Notes then outstanding; and provided,
further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser, in
good faith, in which case the fair market value shall be equal to the
average of the determinations by each such Appraiser.
In either case the adjustments shall be described in a statement provided to the
holders of Notes of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of the Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Note shall have the
right thereafter to, at its option, convert the then outstanding principal
amount only into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock following
such reclassification or share exchange, and the Holders of the Notes shall be
entitled upon such event to receive such amount of securities, cash or property
as the shares of the Common Stock of the Company into which the then outstanding
principal amount could have been converted immediately prior to such
reclassification or share exchange would have been entitled. The terms of any
such reclassification or share exchange shall include such terms so as to
continue to give to the Holder the right to receive the securities, cash or
property set forth in this Section 4(c)(vi) upon any conversion following such
event. This provision shall similarly apply to successive reclassifications or
share exchanges.
(vii) If:
A. the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
B. the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
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C. the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; or
D. the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common
Stock of the Company, any consolidation or merger to which the Company
is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share of exchange whereby the
Common Stock is converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Notes, and shall cause to be mailed to the
Holders of Notes at their last addresses as they shall appear upon the stock
books of the Company, at least 30 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, however, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
Holders are entitled to convert Notes during the 30-day period commencing the
date of such notice to the effective date of the event triggering such notice.
(viii) All calculations under this Section 4 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(ix) Whenever the Conversion Price is adjusted pursuant to
Section 4(c)(i) - (v), the Company shall promptly mail to each Holder of Notes,
a notice setting forth the Initial Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(x) Notwithstanding anything to the contrary herein, in no
event shall the Conversion Price be adjusted for (i) issuances of shares upon
exercise of any warrants, options or convertible securities outstanding as of
the date hereof; (ii) issuances of shares upon conversion of any Notes; (iii)
issuances of options (or shares upon the exercise thereof), stock bonuses, or
shares pursuant to the Company's employee stock incentive plan, and (iv)
issuances of shares in a private placement of the Company's common stock which
is not offered to all shareholders and
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not subject to registration rights prior to the Maturity Date of this Note.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which might
materially and adversely affect the rights of the Holders (different
than or distinguished from the effect generally on rights of holders of
any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated
by the Company, the Company shall mail a written notice briefly
describing the action contemplated and the material adverse effects of
such action on the rights of the Holders at least 30 calendar days
prior to the effective date of such action, and an Appraiser selected
by the Holders of majority in interest of the Notes shall give its
opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 4), of the Conversion Price
(including, if necessary, any adjustment as to the securities into
which Notes may thereafter be convertible) and any distribution which
is or would be required to preserve without diluting the rights of the
Holders; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an
additional Appraiser, in good faith, in which case the adjustment shall
be equal to the average of the adjustments recommended by each such
Appraiser. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of
any such action contemplated, as the case may be; provided, however,
that no such adjustment of the Conversion Price shall be made which in
the opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of the
Common Stock solely for the purpose of issuance upon conversion of the
Notes and payment of interest on the Notes, each as herein provided,
free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of
shares of the Common Stock as shall (subject to any additional
requirements of the Company as to reservation of such shares set forth
in the Financing Agreement) be issuable (taking into account the
adjustments and restrictions of Section 4(c)) upon the conversion of
the outstanding principal amount of the Notes and payment of interest
hereunder. The Company covenants that all shares of the Common Stock
that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the
Registration Statement has been declared effective under the Securities
Act, freely tradeable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the Per
Share Market Value at such time. If the Company elects not, or is
unable, to make such a cash payment, the holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of
Common Stock.
11
(g) The issuance of certificates for shares of the Common
Stock on conversion of the Notes shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than
that of the Holder of such Notes so converted and the Company shall not
be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Notes hereunder, including,
without limitation, any Conversion Notice, shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the Company, at 0000 Xxxxxxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxx 00000 (facsimile number 941-355-9373), attention
Xxxxxxx Xxxxxxx, President, or such other address or facsimile number
as the Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section. Any and all notices or other
communications or deliveries to be provided by the Company hereunder
shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the Holder at the
facsimile telephone number or address of such Holder appearing on the
books of the Company, or if no such facsimile telephone number or
address appears, at the principal place of business of the holder. Any
notice or other communication or deliveries hereunder shall be deemed
given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 5:00 p.m.
(New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New
York City time) on such date, (iii) four days after deposit in the
United States mails, (iv) the Business Day following the date of
mailing, if send by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to
be given.
Section 5. Prepayment.
(a) The Company shall have the right to prepay up to fifty
(50%) of the principal balance of this Note and all accrued but unpaid
interest thereon prior to the Maturity Date in cash provided that the
Company shall pay the Holder a premium of 15% of the principal balance
prepaid, along with any and all accrued interest and other charges due
under this Note. The Company shall have the right to prepay up to one
hundred (100%) of the principal balance of this Note and all accrued
but unpaid interest thereon prior to the Maturity Date in cash provided
that (i) the Company shall pay the Holder a
12
premium of 15% of the principal balance prepaid, along with any and all
accrued interest and other charges due under this Note and (ii) the
Underlying Shares of Common Stock issuable upon conversion of this Note
(x) are registered for resale pursuant to an effective Registration
Statement (as defined in Section 6), and (y) are listed or quoted for
trading on an "Authorized Market" (as defined in Section 6). The
Company may prepay this Note in Common Stock as provided in the second
main paragraph of this Note and subject to the conditions set forth
there.
(b) (i) The Company shall give at least five (5) business
days, but not more than ten (10) business days, written notice of any
intention to prepay this Note prior to the Maturity Date to the Holder
which notice shall specify the "Prepayment Date".
(ii) With respect to any Note for which a Notice of
Conversion is submitted to the Company prior to the Prepayment Date,
the Notice of Conversion shall take precedence and such Note shall be
converted in accordance with the terms hereof. Furthermore, in the
event such prepayment is not timely made, the Notice of Prepayment
shall be null and void, and any rights of the Company to thereafter
prepay this Note shall be subject to the deposit of the amount to be
paid in escrow, with an attorney designated by the Holder, not later
than two business days after delivery of any Notice.
Section 6. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Authorized Market" means the Pink Sheets, OTC Bulletin Board,
the Nasdaq SmallCap Stock Market ("NASDAQ"), the American Stock
Exchange, Nasdaq National Market or The New York Stock Exchange.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other government action to close.
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 13d-5(b)(1) promulgated under
the Exchange Act) of in excess of 49% of the voting securities of the
Company coupled with a replacement of more than one-half of the members
of the Company's board of directors which is not approved by those
individuals who are members of the board of directors on the date
hereof in one or a series of related transactions, or (ii) the merger
of the Company with or into another entity, consolidation or sale of
all or substantially all of the assets of the Company in one or a
series of related transactions, unless following such transaction, the
holders of the Company's securities continue to hold at least 40% of
such securities following such transaction. The execution by the
Company of an agreement to which the Company is a party or by which it
is bound providing for any of the events set forth above in (i) or (ii)
does not constitute the occurrence of the event until after the event
in fact occurs.
13
"Common Stock" means the Company's common stock, no par value
per share, and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Free Trading Certificates" shall mean certificates
representing shares of Common Stock which are eligible for sale
pursuant to an effective Registration Statement.
"Holder or Holders" shall mean the initial Holder of this Note
and any subsequent Holder or Holders by transfer or succession. As used
in this Note, "Holder" may refer to one or more "Holders" depending on
the context.
"Original Issue Date" shall mean the date of the first
issuance of any Notes regardless of the number of transfers of any Note
and regardless of the number of instruments which may be issued to
evidence such Note.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated May 7, 2003, between the Company and the initial
Holder of the Note.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying
Shares and naming the Holder as a "selling stockholder" thereunder.
"Trading Day" means (a) a day on which the Common Stock is
traded on the NASDAQ, or (b) if the Common Stock is not listed on the
NASDAQ, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c)
if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except Saturday, Sunday and any day which shall
be a legal holiday or a day on which banking institutions in the State
of New York are authorized or required by law or other government
action to close.
"Underlying Shares" means the number of shares of Common
Stock into which the Notes are convertible and any shares of Common
Stock issuable in payment of interest as provided under and in
accordance with the terms hereof and the Financing Agreement.
Section 7. Except as expressly provided herein, no provision of this
Note shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay
14
the principal of, interest and liquidated damages (if any) on, this Note at the
time, place, and rate, and in the coin or currency, herein prescribed. This Note
is a direct obligation of the Company. This Note ranks pari passu with all other
Notes now or hereafter issued under the terms set forth herein.
Section 8. This Note shall not entitle the Holder to any of the rights
of a stockholder of the Company, including without limitation, the right to
vote, to receive dividends and other distributions, or to receive any notice of,
or to attend, meetings of stockholders or any other proceedings of the Company,
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof. As long as there are Notes outstanding, the Company shall
not and shall cause it subsidiaries not to, without the consent of the Holders,
(i) amend its certificate of incorporation, bylaws or other charter documents so
as to adversely affect any rights of the Holders; or (ii) repay, repurchase or
otherwise acquire shares of its Common Stock or other equity securities other
than as to the Underlying Shares to the extent permitted or required under the
Related Agreements (as defined in the Purchase Agreement).
Section 9. If this Note shall be mutilated, lost, stolen or destroyed,
the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution for a lost,
stolen or destroyed Note, a new Note for the principal amount of this Note so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Note, and of the ownership hereof, and
indemnity, if requested, all reasonably satisfactory to the Company.
Section 10. This Note shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
exclusive jurisdiction of the federal courts whose districts encompass any part
of the City of New York or the state courts of the State of New York sitting in
the City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non coveniens, to the bringing of any
such proceeding in such jurisdictions. To the extent determined by such court,
the Company shall reimburse the Holder for any reasonable legal fees and
disbursements incurred by the Holder in enforcement of or protection of any of
its rights under any of this Note
Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. Any waiver must be
in writing.
Section 12. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any
15
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next calendar month, the preceding Business Day in the appropriate calendar
month).
Section 14. Security The obligation of the Company for payment of
principal, interest and all other sums hereunder, in the event of a default and
failure of the Company to perform hereunder, is secured solely by the pledge of
certain shares of the Company's Common Stock owned beneficially and of record by
the Persons specified on Schedule A hereto, (the "Collateral Shares") under the
terms and conditions of a Stock Pledge Agreement, by reference made a part of
the terms of this Note. The security interest of the Holder as to the Collateral
Shares is perfected by the delivery of the Collateral Shares to any one of the
persons set forth on Schedule A or their duly appointed counsel as pursuant to
the terms of the Pledge Agreement.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer duly authorized for such purpose, as of the date first
above indicated.
INVISA, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, President
----------------------------------
Xxxxxxx X. Xxxxxxx, President
Attest:
By: /s/ Xxxxxxx Xxxxx, as Secretary
-------------------------------
Xxxxxxx Xxxxx, Secretary
16
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby elects to convert Note No. [ ] into shares of Common
Stock, no par value (the "Common Stock"), of INVISA, INC. (the "Company")
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith, and such transfer may only be accomplished to the
extent permitted in Section 2 of this Note. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.
Conversion calculations: _________
Date to Effect Conversion: _______________________________
Principal Amount of Notes to be Converted: _______________________________
Number of shares of Common Stock to be Issued: _______________________________
Applicable Conversion Price: _______________________________
Shares to be Issued in Name of: _______________________________
Shares to be Delivered to: _______________________________
_______________________________
_______________________________
Signature _____________________
Name __________________________
Address _______________________
17
SCHEDULE A
COLLATERAL SHARES
Name Date Issued Certificate Number Number of Shares
--------------------------------------------------------------------------------
Xxxxxxx Xxxxxxx Xxxxxx
Irrevocable Trust 2-9-00 3432 87,500
Xxxxxxxxx Xxxxxxxx Xxxxxx
Irrevocable Trust 2-9-00 3430 87,500
Xxxxxxx X. Xxxxxxx 2-9-00 3434 175,000
18
