EXHIBIT 10.12
AUGMENT SYSTEMS, INC.
CLASS A PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD,
ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED. THE COMPANY'S SUBSCRIPTION AGREEMENT
WITH THE HOLDER CONTAINS ADDITIONAL PROVISIONS RESTRICTING THE TRANSFER OF THIS
NOTE. A COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE COMPANY'S
OFFICE.
$_________________ _____________, 1996
FOR VALUE RECEIVED, AUGMENT SYSTEMS, INC., a Delaware
corporation ("the Company"), with its principal office at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, promises to pay to the order of
____________________________ residing at _________________________________
("Holder"), or registered assigns, on the earliest of (i) November 30, 1997,
(ii) the date of consummation by the Company for an initial public offering
("IPO") of its securities, as described in Section 4.1, or (iii) the date of
consummation of a sale by the Company of substantially all of its assets or
certain mergers or consolidations of the Company as described in Section 4.2 (in
any such event, "Maturity Date"), the principal amount of ________________
Dollars ($____________), in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public or private debts, together with interest on the unpaid balance of said
principal amount from time to time outstanding at the rate of twelve (12%)
percent per annum; provided, however, that if the Company has not consummated an
IPO by May 30, 1997, then the interest rate shall be fourteen (14%) percent per
annum, assessed retroactively to the date hereof. In the event that this Note is
not paid in full on or before the Maturity Date, interest shall accrue on the
outstanding principal of and, to the extent permitted by law, interest on the
Note from the Maturity Date up to and including the date of payment
at a rate equal to the lesser of eighteen percent (18%) per annum or the maximum
interest rate allowed under applicable law. This Note shall be paid pro rata
with certain additional notes of like tenor being issued simultaneously
herewith. Payments of principal and interest are to be made at the address of
the Holder designated above or at such other place as the Holder shall have
notified the Company in writing at least five days before such payment is due.
This Note is issued pursuant to a subscription agreement
between the Company and the Holder ("Subscription Agreement"). Reference herein
to the Subscription Agreement shall in no way impair the absolute and
unconditional obligation of the Company to pay both principal and interest
hereon as provided herein.
1. Use of Proceeds. The Company agrees that the proceeds of this Note
shall not be used to prepay any indebtedness for borrowed money or to pay for
Related Party Obligations (as hereinafter defined). "Related Party Obligations"
shall mean all of the Company's obligations, including indebtedness (including
principal and any interest thereon) for borrowed funds and unpaid salaries, fees
or other compensation, owed to any of its officers, directors, stockholders or
their affiliates, for whatever purpose made and whether or not evidenced by a
note, bond, debenture or other formal instrument, excluding, for the purposes
hereof, any salaries or fees payable on a current basis to officers and
directors in the ordinary course of the Company's business.
2. Events of Default.
(a) Upon the occurrence of any of the following events (herein
called "Events of Default"):
(i) The Company shall fail to pay the principal of or
interest on this Note on the Maturity Date;
(ii) (A) The Company shall commence any proceeding or
other action relating to it in bankruptcy or seek reorganization,
arrangement, readjustment of its debts, receivership, dissolution,
liquidation, winding-up, composition or any other relief under any
bankruptcy law, or under any other insolvency, reorganization,
liquidation, dissolution, arrangement, composition, readjustment of
debt or any other similar act or law, of any jurisdiction, domestic or
foreign, now or hereafter existing; or (B) the Company shall admit the
material allegations of any petition or pleading in connection with any
such proceeding; or (C) the Company shall apply for, or consent or
acquiesce to, the appointment of a receiver, conservator, trustee or
similar officer for it or for all or a substantial part of its
property; or (D) the Company shall make a general assignment for the
benefit of creditors;
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(iii) (A) The commencement of any proceedings or the
taking of any other action against the Company in bankruptcy or seeking
reorganization, arrangement, readjustment of its debts, liquidation,
dissolution, arrangement, composition, or any other relief under any
bankruptcy law or any other similar act or law of any jurisdiction,
domestic or foreign, now or hereafter existing and the continuance of
any of such events for sixty (60) days undismissed, unbonded or
undischarged; or (B) the appointment of a receiver, conservator,
trustee or similar officer for the Company for any of its property and
the continuance of any of such events for sixty (60) days undismissed,
unbonded or undischarged; or (C) the issuance of a warrant of
attachment, execution or similar process against any of the property of
the Company and the continuance of such event for sixty (60) days
undismissed, unbonded and undischarged;
(iv) Any breach of any of the Company's
representations or warranties contained in the Subscription Agreement
or the Agency Agreement dated _____________ ___, 1996 between the
Company and ▇▇▇▇▇▇▇ Equities, Inc.;
(v) The Company shall fail to perform any obligation
of the Company contained in the Subscription Agreement or the Agency
Agreement, after giving effect to any applicable notice provisions and
cure periods;
(vi) The Company shall fail to comply with any of its
obligations under this Note; provided, however, that with respect to a
failure to comply with any of the provisions of Sections 3.1(a) and (c)
of this Note, only if such failure is not remedied within thirty (30)
days after the Company's receipt of written notice of same;
(vii) The Company shall default with respect to any
indebtedness for borrowed money (other than under this Note) if either
(a) the effect of such default is to accelerate the maturity of such
indebtedness (giving effect to any applicable grace periods) or (b) the
holder of such indebtedness declares the Company to be in default
(giving effect to any applicable grace periods); or
(viii) Any judgment or judgments against the Company
or any attachment, levy or execution against any of its properties for
any amount in excess of $25,000 in the aggregate shall remain unpaid,
or shall not be released, discharged, dismissed, stayed or fully bonded
for a period of 30 days or more after its entry, issue or levy, as the
case may be;
then, and in any such event, the Holder at its option and without written notice
to the Company, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest,
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or other notice of any kind, all of which are expressly waived. The Events of
Default listed herein are solely for the purpose of protecting the interests of
the Holder of this Note. If the Note is not paid in full upon acceleration, as
required above, interest shall accrue on the outstanding principal of and, to
the extent permitted by law, interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
eighteen (18%) percent per annum or the maximum interest rate permitted by
applicable law.
(b) Non-Waiver and Other Remedies. No course of dealing or
delay on the part of the Holder of this Note in exercising any right hereunder
shall operate as a waiver or otherwise prejudice the right of the Holder of this
Note. 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.
(c) Collection Costs; Attorney's Fees. In the event this Note
is turned over to an attorney for collection, the Company agrees to pay all
reasonable costs of collection, including reasonable attorney's fees and
expenses and all out of pocket expenses incurred in connection with such
collection efforts, which amounts may, at the Holder's option, be added to the
principal hereof.
3. Obligation to Pay Principal and Interest; Covenants. No provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Note at the
place, at the respective times, at the rates, and in the currency herein
prescribed.
3.1. Affirmative Covenants. The Company covenants and agrees
that, while this Note is outstanding, it shall:
(a) Pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income and profits, or upon any
properties belonging to it before the same shall be in default; provided,
however, that the Company shall not be required to pay any such tax, assessment,
charge or levy which is being contested in good faith by proper proceedings and
adequate reserves for the accrual of same are maintained if required by
generally accepted accounting principles;
(b) Preserve its corporate existence and continue to engage in
business of the same general type as conducted as of the date hereof;
(c) Comply in all respects with all statutes, laws,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations and requirements ("Requirement(s)") of all
governmental bodies, departments, commissions, boards, companies or associates
insuring the premises, courts, authorities, officials, or officers, which are
applicable to the Company; except wherein the failure to comply would not have a
material adverse effect on the Company; provided that nothing
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contained herein shall prevent the Company from contesting the validity or the
application of any Requirements.
3.2. Negative Covenants. The Company covenants and agrees that
while this Note is outstanding it will not directly or indirectly:
(a) Guaranty or otherwise in any way become or be responsible
for indebtedness for borrowed money or for obligations of any of its officers,
directors or principal stockholders or any of their affiliates, contingently or
otherwise, other than such guaranties existing as of the date hereof;
(b) Declare or pay cash dividends;
(c) Sell, transfer or dispose of, any of its assets other than
in the ordinary course of its business and for fair value;
(d) Purchase, redeem, retire or otherwise acquire for value
any of its capital stock now or hereafter outstanding; or
(e) Prepay any indebtedness for borrowed funds or pay Related
Party Obligations.
4. Repayment.
4.1. Initial Public Offering. This Note shall be paid in full,
without premium but with all interest accrued thereon, in the event, and on the
date, that the Company successfully consummates an initial public offering of
securities of the Company ("IPO"). The words "successful consummation," for this
purpose, shall mean the date on which the Company receives the first net
proceeds of the offering.
4.2. Consolidation or Merger; Sale of Assets. This Note shall
be paid in full, without premium but with all interest accrued thereon, in the
event (a) the Company consolidates or merges with another corporation, unless
(i) the Company shall be the surviving corporation in such consolidation or
merger or (ii) the other corporation controls, is under common control with or
is controlled by the Company immediately prior to the consolidation or merger
whether or not the Company shall be the surviving corporation in such
consolidation or merger, in which event this Note shall remain outstanding as an
obligation of the consolidated or surviving corporation, or (b) the Company
consummates a sale of all or substantially all of its assets, or (c) there
occurs a sale of all or substantially all of the Company's outstanding Common
Stock.
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5. Required Consent. The Company may not modify any of the terms of
this Note without the prior written consent of the Holder.
6. Lost Documents. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in the case of loss, theft or destruction) of indemnity
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Company will make and deliver in lieu of such Note a new Note
of like tenor and unpaid principal amount and dated as of the original date of
the Note.
7. Miscellaneous.
7.1. Benefit. This Note shall be binding upon and inure to the
benefit of the parties hereto and their legal representatives, successors and
assigns.
7.2. Notices and Addresses. All notices, offers, acceptances
and any other acts under this Note (except payment) shall be in writing, and
shall be sufficiently given if delivered to the addressee in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
To Holder: To Holder's address on page 1 of this Note
To The Company: Augment Systems, Inc.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, President and Chief
Executive Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
In either case with copies to: Warner & ▇▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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or to such other address as any of them, by notice to the others may designate
from time to time. Time shall be counted to, or from, as the case may be,
delivery or, if mailed, ______ (__) business days after mailing.
(a) Governing Law. The Company (i) agrees that this Note and
any dispute, disagreement, or issue of construction or interpretation arising
hereunder whether relating to its execution, its validity, its obligations
provided herein or performance shall be governed and interpreted according to
the law of the State of New York and (ii) agrees that service of process upon it
mailed by certified mail to its address shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding.
(b) Jurisdiction and Venue. The Company (i) agrees that any
legal suit, action or proceeding arising out of or relating to this Note shall
be instituted exclusively in New York State Supreme Court, County of New York or
in the United States District Court for the Southern District of New York, (ii)
waives any objection to the venue of any such suit, action or proceeding and the
right to assert that such forum is not a convenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding, and the Company further agrees to accept
and acknowledge service of any and all process which may be served in any such
suit, action or proceeding in New York State Supreme Court, County of New York,
or in the United States District Court for the Southern District of New York and
agrees that service of process upon it mailed by certified mail to its address
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding.
(c) Section Headings. Section headings herein have been
inserted for reference only and shall not be deemed to limit or otherwise
affect, in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Note.
(d) Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements contained herein shall survive
the delivery of this Note.
IN WITNESS WHEREOF, this Note has been executed and delivered
on the date specified above by the duly authorized representative of the
Company.
AUGMENT SYSTEMS, INC.
By:
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▇▇▇▇▇ ▇. ▇▇▇▇, Chief Financial Officer
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