EXHIBIT 10.11
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN EXEMPTION FROM REGISTRATION.
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CONVERTIBLE NOTE
Note No. 1999-1
$10,000,000 September 30, 1999
San Francisco, California
FOR VALUE RECEIVED, PeoplePC Inc., a Delaware corporation (the "Company"),
promises to pay to SOFTBANK Capital Partners L.P. ("SOFTBANK) , or its assigns
(each of SOFTBANK and any such assign, a "Holder") , the principal sum of
$10,000,000 or such lesser amount as shall then equal the outstanding principal
amount hereof, together with interest from the date of this Convertible Note on
the unpaid principal balance at a rate equal to 7% per annum, computed on the
basis of the actual number of days elapsed and a year of 360 days consisting of
twelve 30-day months, with interest to accrue from the date hereof.
Notwithstanding the foregoing, if the Purchase Agreement, as defined below, is
entered into within 30 days of the date hereof, the interest accrued up to and
including the date of execution of the Purchase Agreement shall be forgiven.
Unless this Convertible Note is earlier converted in accordance with Section 3
hereof, all unpaid principal, together with any then unpaid and accrued interest
and other amounts payable hereunder, shall be due and payable on the earlier of
(i) September 30, 2004 (the "Maturity Date"), or (ii) the acceleration of the
maturity thereof in accordance with Section VI of the Loan Agreement dated
September 30, 1999 (the "Loan Agreement") between the Company and SOFTBANK.
This Convertible Note shall be governed by, and be subject to, the terms of
the Loan Agreement, all of which provisions are hereby incorporated herein by
reference.
The following is a statement of the rights of the Holder and the conditions
to which this Convertible Note is subject, and to which the Holder hereof, by
the acceptance of this Convertible Note, agrees:
1. Definitions. As used in this Convertible Note, the following
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capitalized terms have the following meanings:
(a) The "Company" includes the corporation initially executing this
Convertible Note and any Person that shall succeed to or assume the obligations
of the Company under this Convertible Note.
(b) "Holder" shall mean the Person specified in the introductory
paragraph of this Convertible Note or any Person who shall at the time be the
registered holder of this Convertible Note.
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(c) "Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or any other
entity or a governmental authority.
2. Interest. Accrued interest on this Convertible Note shall be payable
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at such time as the outstanding principal amount hereof shall be paid in full;
provided however, that in the event this Convertible Note is not previously
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converted and the principal amount hereof is not repaid in full on the Maturity
Date, accrued but unpaid interest on this Convertible Note shall thereafter be
paid in cash on the Maturity Date, the last business day of each calendar month
thereafter and on such date as the outstanding principal amount hereof shall be
paid in full.
3. Conversion.
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(a) Series B Preferred Stock Financing. Upon the first closing of the
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sale of securities pursuant to a mutually acceptable purchase agreement between
the Company and SOFTBANK consistent with the terms of the letter of
understanding of even date herewith (the "Purchase Agreement"), all principal
and accrued interest due on this Convertible Note shall automatically convert
into a number of shares of Series B Preferred Stock (the "Conversion Number")
determined by dividing all of the unpaid principal and accrued but unpaid
interest on this Convertible Note as of the First Closing Date (as defined in
the Purchase Agreement) by the purchase price per share specified in the
Purchase Agreement, subject to appropriate adjustment in the event of stock
splits, stock dividends, recapitalization and similar events (as so adjusted,
the "Conversion Price"). The cancellation of this Convertible Note in
connection with such conversion shall be deemed to be payment in full of the
purchase price of a number of shares equal to the Conversion Number purchased
pursuant to the Purchase Agreement.
(b) Issuance of Securities on Conversion. Concurrent with the
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conversion of this Convertible Note, the Company will cause to be issued in the
name of, and delivered to, the Holder, a certificate or certificates
representing the number of shares of the Series B Preferred Stock to which the
Holder shall be entitled on such conversion. No fractional shares will be
issued on conversion of this Convertible Note and in lieu thereof the Holder
shall be entitled to payment in cash of the amount of the Convertible Note not
converted into shares.
(c) Termination of Rights. All rights with respect to this
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Convertible Note shall terminate upon the issuance of shares of Series B
Preferred Stock upon conversion of this Convertible Note, whether or not this
Convertible Note has been surrendered. Notwithstanding the foregoing, the
Holder agrees to surrender this Convertible Note to the Company for cancellation
as soon as is practicable following conversion of this Convertible Note.
4. Successors and Assigns. Subject to the restrictions on transfer
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described in Section 6 below, the rights and obligations of the Company and the
Holder shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
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5. Waiver and Amendment. Any provision of this Convertible Note may be
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amended, waived or modified upon the written consent of the Company and
SOFTBANK.
6. Assignment. Neither this Convertible Note nor any of the rights,
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interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company or the Holder without the prior
written consent of the other party except (i) in the case of the Company, in
connection with an assignment in whole to a successor corporation to the
Company, provided that such successor corporation acquires, by purchase of
assets, merger or otherwise, all or substantially all of the Company's property
and assets, and (ii) in the case of Holder to any affiliates of Holder or
SOFTBANK Corp., a Japanese corporation, including, without limitation, any
partnership or other entity of which any direct or indirect subsidiary of
SOFTBANK Corp. is a general partner or has investment discretion, or any
employees of any of the foregoing.
7. Addresses for Notices, etc. Any notices and other communications
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required or permitted under this Agreement shall be effective if in writing and
delivered personally or sent by telecopier, Federal Express or registered or
certified mail, postage prepaid, addressed as follows:
If to the Holder, to: SOFTBANK Holdings Inc.
00 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Xxxxxxxxx: (000) 000-0000
SOFTBANK Capital Partners LP.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxx & Xxxxxxxx
1888 Century Park East
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Company, to: PeoplePC Inc.
000 Xxxx Xxxxxx
Xxxxx0000
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
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Telecopier: (000) 000-0000
Attention: Xxxx Xxxxx
with a copy to: Xxxxxx Godward LLP
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date delivered, if delivered personally,
(b) two business days after being sent, if sent by Federal Express or other
commercial overnight delivery service, (c) one business day after being sent, if
sent by telecopier with confirmation of good transmission and receipt, and (d)
three business days after being sent, if sent by registered or certified mail.
Each of the parties hereto shall be entitled to specify another address by
giving notice as aforesaid to each of the other parties hereto.
8. Payment. Except in the event this Convertible Note is converted into
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Series B Preferred Stock as provided herein, payment shall be made in lawful
tender of the United States.
9. Severability. The holding of any provision of this Convertible Note to
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be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provisions and the other provisions of this Convertible Note
shall remain in full force and effect.
10. Governing Law. This Convertible Note shall be governed by and
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construed and enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Convertible Note to be
issued as of the date first written above.
PeoplePC Inc.,
a Delaware corporation
By:
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Title:
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