EXHIBIT 10.1
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO INCENTRA SOLUTIONS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, INCENTRA SOLUTIONS, INC., a Nevada
Corporation (the "COMPANY"), promises to pay to ___________________________ (the
"HOLDER") or its registered assigns or successors in interest, the sum of
_______________________, together with any accrued and unpaid interest hereon,
on June 6, 2007 (the "MATURITY DATE") if not sooner paid.
Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in that certain Note Purchase Agreement
dated as of the date hereof by and between the Company and the Holder (as
amended, modified and/or supplemented from time to time, the "PURCHASE
AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 CONTRACT RATE. Subject to Sections 4.2 and 5.10, interest
payable on the outstanding principal amount of this Convertible Term Note (the
"Note" and the "PRINCIPAL AMOUNT" respectively) shall accrue at a rate of twelve
percent (12%) per annum (the "INTEREST RATE").
1.2 PAYMENT. Any outstanding Principal Amount together with
any accrued and unpaid interest and any and all other unpaid amounts which are
then owing by the Company to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the Maturity
Date.
ARTICLE II
HOLDER'S CONVERSION RIGHTS
2.1 OPTIONAL CONVERSION BY XXXXXX. Subject to the terms set
forth in this Article III, the Holder shall have the right, but not the
obligation, to convert all or any portion of
the issued and outstanding Principal Amount and/or accrued interest and fees due
and payable into fully paid and nonassessable shares of Common Stock at $1.40
per share (the "CONVERSION PRICE"). The shares of Common Stock to be issued upon
such conversion are herein referred to as, the "CONVERSION SHARES."
2.2 CONVERSION LIMITATION. Notwithstanding anything herein to
the contrary, in no event shall the Holder be entitled to convert any portion of
this Note in excess of that portion of this Note upon exercise of which the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of this Note
or the unexercised or unconverted portion of any other security of the Holder
subject to a limitation on conversion analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its Affiliates of any amount greater than 9.99% of the then
outstanding shares of Common Stock (whether or not, at the time of such
conversion, the Holder and its Affiliates beneficially own more than 9.99% of
the then outstanding shares of Common Stock). As used herein, the term
"AFFILIATE" means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. For purposes of the proviso to the second preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso. The
limitations set forth herein (x) may be waived by the Holder upon provision of
no less than sixty-one (61) days prior notice to the Company and (y) shall
automatically become null and void (i) following notice to the Company upon the
occurrence and during the continuance of an Event of Default which has not been
waived by the Holder, or (ii) upon receipt by the Holder of a Notice of
Redemption.
2.3 MECHANICS OF HOLDER'S CONVERSION. In the event that the
Holder elects to convert this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed notice of
conversion in substantially the form of Exhibit A hereto (appropriate completed)
("NOTICE OF CONVERSION") to the Company and such Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees that are being converted. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the Holder
shall make the appropriate reduction to the Principal Amount, accrued interest
and fees as entered in its records and shall provide written notice thereof to
the Company within two (2) business days after the Conversion Date. Each date on
which a Notice of Conversion is delivered or telecopied to the Company in
accordance with the provisions hereof shall be deemed a Conversion Date (the
"CONVERSION DATE"). Pursuant to the terms of the Notice of Conversion, the
Company will issue instructions to the transfer agent accompanied by an opinion
of counsel within two (2) business days of the date of the delivery to the
Company of the Notice of Conversion and shall cause the transfer agent to
transmit the certificates representing the Conversion Shares to the Holder
within three (3) business days after receipt by the Company of the Notice of
Conversion (the "DELIVERY DATE"). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion
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shall be deemed to have been issued upon the date of receipt by the Company of
the Notice of Conversion. The Holder shall be treated for all purposes as the
record holder of the Conversion Shares, unless the Holder provides the Company
written instructions to the contrary.
2.4 OPTIONAL CONVERSION BY COMPANY. Subject to the terms set
forth in this Article III, if the average closing price of the Company's
publicly traded Common Stock as reported by Bloomberg, L.P. on the Principal
Market for the five (5) consecutive trading days immediately preceding the
Conversion Date is greater than or equal to 125% of the Conversion Price and
there is an effective registration statement allowing the resale of the
Conversion shares, the Company shall have the right to convert all or any
portion of the then unpaid principal and accrued interest on the Note into fully
paid and nonassessable shares of Common Stock at the Conversion Price. The
shares of Common Stock to be issued upon such conversion are herein also
referred to as the Conversion Shares.
2.5 MECHANICS OF COMPANY'S CONVERSION. 2.6 In the event that
the Company elects to convert this Note into Common Stock, the Company shall
give notice of such election to the Holder in the manner provided for in Section
5.4 below, and such notice shall provide a breakdown in reasonable detail of the
Principal Amount, accrued interest, prepayment penalty and fees that are being
converted. On each Conversion Date and in accordance with the Company's notice
to Holder of its intent to convert, the Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and fees as entered in its
records and shall provide written notice thereof to the Company within two (2)
business days after the Conversion Date. Each date on which a notice from the
Company of its intent to convert is delivered or telecopied to the Holder in
accordance with the provisions hereof shall also be deemed a Conversion Date.
Pursuant to the terms of the Company's notice to Holder, the Company will issue
instructions to the transfer agent accompanied by an opinion of counsel within
two (2) business days of the date of the delivery by the Company of its notice
to Xxxxxx and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder within three (3) business days
after delivery by the Company of such notice (the "DELIVERY DATE"). In the case
of the exercise of the conversion rights set forth herein the conversion
privilege shall be deemed to have been exercised and the Conversion Shares
issuable upon such conversion shall be deemed to have been issued upon the date
of receipt, or deemed receipt in accordance with the provisions of Section 4.4
below, by the Holder of notice of the Company's intent to convert. The Holder
shall be treated for all purposes as the record holder of the Conversion Shares,
unless the Holder provides the Company written instructions to the contrary.
2.6 CONVERSION MECHANICS. The number of shares of Common Stock
to be issued upon each conversion of this Note shall be determined by dividing
that portion of the principal and interest and fees to be converted, if any, by
the then applicable Conversion Price.
2.7 ADJUSTMENT PROVISIONS. The Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to this Note shall be subject to adjustment from time to time upon the
occurrence of certain events during the period that this conversion right
remains outstanding, as follows:
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(a) ADJUSTMENTS TO THE CONVERSION PRICE. Except (i) as provided in
Section 2.7(b) hereof, (ii) in the case of an event described in Section 2.7(c)
hereof and (iii) as the Holder(s) of may otherwise agree in writing to waive the
provisions hereof, if and whenever after the date hereof the Company shall issue
or sell, or is, in accordance with this Section 2.7(a), deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than the
Conversion Price in effect immediately prior to such issuance or sale, then,
upon such issuance or sale (or deemed issuance or sale), the Conversion Price
shall be reduced to the price determined by dividing (i) the sum of (A) the
Common Stock Deemed Outstanding (as defined in subparagraph (x) below)
immediately prior to such issuance or sale (or deemed issuance or sale)
multiplied by the Conversion Price then in effect and (B) the aggregate
consideration, if any, received by the Corporation upon such issuance or sale
(or deemed issuance or sale) by (ii) the Common Stock Deemed Outstanding
immediately after such issuance or sale (or deemed issuance or sale).
For purposes of this Section 2.7(a), the following shall also be
applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company shall, at
any time after the date hereof, in any manner grant (whether directly
or by assumption in a merger or otherwise) any warrants or other rights
to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities"), in each case for consideration
per share (determined as provided in this paragraph and in Section
2.7(a)(vi)) hereof less than the Conversion Price then in effect,
whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, then the total
maximum number of shares of Common Stock issuable upon the exercise of
such Options, or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon exercise of such
Options, shall be deemed to have been issued as of the date of granting
of such Options, at a price per share equal to the amount determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of
such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issuance or sale of such Convertible Securities and upon the conversion
or exchange thereof, by (B) the total maximum number of shares of
Common Stock deemed to have been so issued. Except as otherwise
provided in Section 2.7(a)(iii) hereof, no adjustment of the Conversion
Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company shall,
at any time after the date hereof, in any manner issue or sell any
Convertible Securities for consideration per share (determined as
provided in this paragraph and in Section 2.7(a)(vi)) hereof less than
the Conversion Price then in effect, whether or not the rights to
exchange or convert any such Convertible Securities are immediately
exercisable, then the total maximum
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number of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall be deemed to have been issued
as of the date of the issuance or sale of such Convertible Securities,
at a price per share equal to the amount determined by dividing (A) the
total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock deemed to have been
so issued; PROVIDED, that (1) except as otherwise provided in Section
2.7(a)(iii) hereof, no adjustment of the Conversion Price shall be made
upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities and (2) if any such issuance or
sale of such Convertible Securities is made upon exercise of any
Options to purchase any such Convertible Securities, no further
adjustment of the Conversion Price shall be made by reason of such
issuance or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there
shall occur a change in (A) the maximum number of shares of Common
Stock issuable in connection with any Option referred to in Section
2.7(a)(i) or any Convertible Securities referred to in Section
2.7(a)(i) or (ii) hereof, (B) the purchase price provided for in any
Option referred to in Section 2.7(a)(i) hereof, (C) the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in Section 2.7(a)(i) or (ii) hereof,
or (D) the rate at which Convertible Securities referred to in Section
2.7(a)(i) or (ii) hereof are convertible into or exchangeable for
Common Stock (in each case, other than in connection with an event
described in Section 2.7(b) hereof), then the Conversion Price in
effect at the time of such event shall be adjusted to the Conversion
Price that would have been in effect at such time had such Options or
Convertible Securities that are still outstanding provided for such
changed maximum number of shares, purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect is thereby reduced.
(iv) STOCK DIVIDENDS. If the Company, at any time or from time
to time after the date hereof, shall declare or make, or fix a record
date for the determination of holders of Common Stock entitled to
receive, a dividend or make any other distribution upon any stock of
the Company payable in Common Stock, Options or Convertible Securities,
any Common Stock, Options or Convertible Securities, as the case may
be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration, and the
Conversion Price will be adjusted pursuant to this Section 2.7(a);
PROVIDED, that if any adjustment is made to the Conversion Price as a
result of the declaration of a dividend and such dividend is not
effected, the Conversion Price shall be appropriately readjusted to the
Conversion Price in effect had such dividend not been declared.
(v) OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company, at any
time or from time to time after the date hereof, shall declare or make,
or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in
securities or other property of the Company other than shares of Common
Stock, then and in each such event provision shall be made so that the
Holder
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shall receive upon conversion hereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of such other
securities of the Company or the value of such other property that he
or she would have received had the Note been converted into Common
Stock on the date of such event and had Holder thereafter, during the
period from the date of such event to and including the conversion
date, retained such securities or other property receivable by him or
her during such period giving application to all adjustments called for
during such period under Section 3.7 with respect to the rights of the
Holders; and, PROVIDED, FURTHER, however, that no such adjustment shall
be made if the Holder simultaneously receives a dividend or other
distribution of such securities or other property in an amount equal to
the amount of such securities or other property as he or she would have
received if the outstanding Note had been converted into Common Stock
on the date of such event.
(vi) CONSIDERATION FOR STOCK. If the Company, at any time or
from time to time after the date hereof, shall issue or sell, or is
deemed to have issued or sold, any shares of Common Stock for cash, the
consideration received therefor shall be deemed to be the amount
received or to be received by the Company therefor (determined with
respect to deemed issuances and sales in connection with Options and
Convertible Securities in accordance with clause (A) of Section
2.7(a)(i) or (ii) hereof, as appropriate). In case any shares of Common
Stock shall be issued or sold, or deemed issued or sold, for a
consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value
of such consideration received or to be received by the Company
(determined with respect to deemed issuances and sales in connection
with Options and Convertible Securities in accordance with clause (A)
of Section 2.7(a)(i) or(ii) hereof, as appropriate) as determined in
good faith by the Board of Directors of the Company. In case any
Options shall be issued in connection with the issuance and sale of
other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have
been issued for such consideration as determined in good faith by the
Board of Directors of the Company.
(vii) RECORD DATE. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issuance or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may
be.
(viii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company; PROVIDED, that the disposition of
any such shares shall be considered an issuance or sale of Common Stock
for the purpose of this Section 2.7.
(ix) OTHER ISSUANCES OR SALES. In calculating any adjustment
to the Conversion Price pursuant to this Section 2.7(a): (A) any shares
of Common Stock, Options or
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Convertible Securities issued or sold (or deemed issued or sold
pursuant to Section 2.7(a)(i) or (ii) above) after the date hereof and
prior to the effective date of such adjustment, the issuance or sale
(or deemed issuance or sale) of which did not result in any adjustment
to the Conversion Price under this Section 2.7(a), shall be deemed to
have been issued or sold as part of the issuance or sale (or deemed
issuance or sale) giving rise to such adjustment for the same
consideration per share as the Company received in the issuance or sale
(or deemed issuance or sale) giving rise to such adjustment, and (B)
any Options or Convertible Securities that provide, as of the effective
date of such adjustment, for the issuance upon exercise or conversion
thereof of an indeterminable number of shares of Common Stock shall
(together with the shares of Common Stock issuable upon exercise or
conversion thereof) be disregarded; PROVIDED, that at such time as the
number of shares of Common Stock issuable upon exercise or conversion
of such Options or Convertible Securities becomes determinable, the
Conversion Price shall be adjusted as provided in Section 2.7(a)(iii)
above.
(x) COMMON STOCK DEEMED OUTSTANDING. For purposes of this
Section 2.7, the term "Common Stock Deemed Outstanding" shall mean, at
any time, the sum of (A) the number of shares of Common Stock
outstanding immediately prior to the date hereof (including for this
purpose all shares of Common Stock issuable upon exercise or conversion
of any Options or Convertible Securities outstanding immediately prior
to the date hereof), PLUS (B) the number of shares of Common Stock
issued or sold (or deemed issued or sold) after the date hereof, the
issuance or sale of which resulted in an adjustment to the Conversion
Price pursuant to Section 2.7(a) hereof, PLUS (C) the number of shares
of Common Stock deemed issued or sold pursuant to Section 2.
7(a)(ix)(A) above; PROVIDED, that Common Stock Deemed Outstanding shall
not include any shares of Common Stock issuable upon conversion of the
Notes or exercise of the Warrants.
(b) CERTAIN ISSUES OF COMMON STOCK EXCEPTED. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Price in the case of the issuance from and after
the Filing Date of (i) shares of Common Stock upon conversion of the Notes, upon
exercise of the Warrants, upon conversion of other convertible securities issued
prior to the date hereof, or upon exercise of warrants or options issued prior
to the date hereof, and (ii) up to 4,012,500 shares of Common Stock or options
therefor to directors, officers, employees or consultants of the Company in
connection with their service as directors of the Company, their employment by
the Company or their retention as consultants by the Company, in each case
authorized by the Board of Directors and issued pursuant to the Company's 2000
Equity Incentive Plan, 2006 Stock Option Plan, or 401K Plan ("EXCLUDED SHARES").
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. In case the Company
shall at any time after the Filing Date subdivide its outstanding shares of
Common Stock into a greater number of shares (by any stock split, stock dividend
or otherwise), the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
Company shall at any time after the date hereof combine its outstanding shares
of Common Stock into a smaller number of shares (by any reverse stock split or
otherwise), the Conversion Price in effect immediately prior to such combination
shall be proportionately increased. In the
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case of any such subdivision, no further adjustment shall be made pursuant to
Section 2.7(a)(iv) hereof by reason thereof.
(d) RECLASSIFICATION. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock (i) immediately prior to or (ii) immediately after,
such reclassification or other change at the sole election of the Holder.
2.8 RESERVATION OF SHARES. During the period the conversion
right exists, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Conversion
Shares upon the full conversion of this Note and the Warrant. The Company
represents that upon issuance, the Conversion Shares will be duly and validly
issued, fully paid and non-assessable. The Company agrees that its issuance of
this Note shall constitute full authority to its officers, agents, and transfer
agents who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for the Conversion Shares upon
the conversion of this Note.
2.9 REGISTRATION RIGHTS. The Holder has been granted
registration rights with respect to the Conversion Shares as set forth in the
Registration Rights Agreement.
2.10 ISSUANCE OF NEW NOTE. Upon any partial conversion of this
Note, a new Note containing the same date and provisions of this Note shall, at
the request of the Holder, be issued by the Company to the Holder for the
principal balance of this Note and interest which shall not have been converted
or paid. Subject to the provisions of Article IV of this Note, the Company shall
not pay any costs, fees or any other consideration to the Holder for the
production and issuance of a new Note.
ARTICLE III
EVENTS OF DEFAULT
3.1 EVENTS OF DEFAULT. The occurrence of any of the following
events set forth in this Section 4.1 shall constitute an event of default
("EVENT OF DEFAULT") hereunder:
(a) FAILURE TO PAY. The Company fails to pay when due
any installment of principal, interest or other fees hereon in
accordance herewith, and such failure shall continue for a period of
five (5) days following the date upon which any such payment was due.
(b) BREACH OF COVENANT. The Company breaches any
covenant or any other term or condition of this Note in any material
respect and such breach, if subject to cure, continues for a period of
fifteen (15) days after the occurrence thereof.
(c) BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation, warranty or statement made or furnished by the Company
in this Note, the Purchase
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Agreement or any other Related Agreement shall at any time be false or
misleading in any material respect on the date as of which made or
deemed made.
(d) DEFAULT UNDER OTHER AGREEMENTS. The occurrence of
any default (or similar term) in the observance or performance of any
other agreement or condition relating to any indebtedness or contingent
obligation of the Company, except for payment or other obligations
related to that certain promissory note issued by the Company to Xxxxxx
Xxxxx on or about February 18, 2005, beyond the period of grace (if
any), the effect of which default is to cause, or permit the holder or
holders of such indebtedness or beneficiary or beneficiaries of such
contingent obligation to cause, such indebtedness to become due prior
to its stated maturity or such contingent obligation to become payable;
(e) BANKRUPTCY. The Company shall (i) apply for,
consent to or suffer to exist 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, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect),
(iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, without challenge within ten (10) days of
the filing thereof, or failure to have dismissed, within thirty (30)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting
any of the foregoing;
(f) JUDGMENTS. Attachments or levies in excess of
$250,000 in the aggregate are made upon the Company assets or a final
and non-appealable judgment is rendered against the Company's property
involving a liability of more than $250,000 which shall not have been
vacated, discharged, stayed or bonded within ninety (90) days from the
entry thereof;
(g) INSOLVENCY. The Company shall admit in writing
its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
(h) INDICTMENT; PROCEEDINGS. The indictment or
threatened indictment of the Company or any executive officer of the
Company under any criminal statute, or commencement or threatened
commencement of criminal or civil proceeding against the Company or any
executive officer of the Company pursuant to which statute or
proceeding penalties or remedies sought or available include forfeiture
of any of the property of the Company;
(i) THE PURCHASE AGREEMENT AND RELATED AGREEMENTS.
(i) An Event of Default shall occur under and as defined in the
Purchase Agreement or any Related Agreement, (ii) the Company shall
breach any term or provision of the Purchase Agreement or any other
Related Agreement in any material respect and such breach, if capable
of cure, continues unremedied for a period of fifteen (15) days after
the occurrence thereof, (iii) the Company attempts to terminate,
challenges the validity of, or its liability under, the Purchase
Agreement or any Related Agreement, (iv) any
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proceeding shall be brought to challenge the validity, binding effect
of the Purchase Agreement or any Related Agreement or (v) the Purchase
Agreement or any Related Agreement ceases to be a valid, binding and
enforceable obligation of the Company (to the extent such persons or
entities are a party thereto);
(j) STOP TRADE. An SEC stop trade order or Principal
Market trading suspension of the Common Stock shall be in effect for
five (5) consecutive days or five (5) days during a period of ten (10)
consecutive days, excluding in all cases a suspension of all trading on
a Principal Market, provided that the Company shall not have been able
to cure such trading suspension within thirty (30) days of the notice
thereof or list the Common Stock on another Principal Market within
sixty (60) days of such notice; or
(k) FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT
NOTE. The Company's failure to deliver Common Stock to the Holder
pursuant to and in the form required by this Note and the Purchase
Agreement and, if such failure to deliver Common Stock shall not be
cured within two (2) business days or the Company is required to issue
a replacement Note to the Holder and the Company shall fail to deliver
such replacement Note within seven (7) business days.
3.2 DEFAULT INTEREST. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional interest on
this Note in an amount equal to one and one half percent (1.5%) per month, and
all outstanding obligations under this Note, the Purchase Agreement and each
other Related Agreement, including unpaid interest, shall continue to accrue
interest at such additional interest rate from the date of such Event of Default
until the date such Event of Default is cured or waived.
3.3 ACCELERATION. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may declare
immediately due and payable all obligations and liabilities owing by Company to
the Holder under this Note, the Purchase Agreement and/or any other Related
Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 CONVERSION PRIVILEGES. The conversion privileges set forth
in Article II shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.
4.2 CUMULATIVE REMEDIES. The remedies under this Note shall be
cumulative.
4.3 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of the Holder hereof 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. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
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4.4 NOTICES. Any notice herein required or permitted to be
given shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party notified, (b) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Company at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, or at such other address as the Company or the Holder
may designate by ten days advance written notice to the other parties hereto. A
Notice of Conversion shall be deemed given when made to the Company pursuant to
the Purchase Agreement.
4.5 AMENDMENT PROVISION. The term "Note" and all references
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
4.6 ASSIGNABILITY. This Note shall be binding upon the Company
and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder in accordance with
the requirements of the Purchase Agreement. The Company may not assign any of
its obligations under this Note without the prior written consent of the Holder,
any such purported assignment without such consent being null and void.
4.7 COST OF COLLECTION. In case of any Event of Default under
this Note, the Company shall pay the Holder reasonable costs of collection,
including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Note shall be governed by and
construed and enforced in accordance with the laws of the State of Colorado,
without regard to its principles of conflicts of laws.
4.9 SEVERABILITY. In the event that any provision of this Note
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.
4.10 MAXIMUM PAYMENTS. Nothing contained herein shall be
deemed to establish or require the payment of a rate of interest or other
charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum rate permitted by such law, any payments in excess of such maximum rate
shall be credited against amounts owed by the Company to the Holder and thus
refunded to the Company.
4.11 UNSECURED NOTE. This Note is unsecured.
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4.12 CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Note and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.
IN WITNESS WHEREOF, the Company has caused this Secured
Convertible Term Note to be signed in its name effective as of this 9th day of
June, 2006.
INCENTRA SOLUTIONS, INC.
By: /s/Xxxxxx X. Xxxxxxx III
------------------------------
Name: Xxxxxx X. Xxxxxxx III
Title: Chief Executive Officer
WITNESS:
----------------------------------
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of
the Convertible Term Note into Common Stock)
[Name and Address of Company]
The undersigned hereby converts $_________ of the principal due on
[specify applicable Repayment Date] under the Secured Convertible Term Note
dated as of June 9, 2006 (the "NOTE") issued by Incentra Solutions, Inc. (the
"COMPANY") by delivery of shares of Common Stock of the Company ("SHARES") on
and subject to the conditions set forth in the Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
[HOLDER]
By:_______________________________
Name:_____________________________
Title:____________________________
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