EXHIBIT 10.34
NOTE
THIS NOTE HAS NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE NOTE MAY NOT BE OFFERED, RESOLD,
PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
NNo. US $ 4,092,920
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SAC TECHNOLOGIES, INC.
SECURED NOTE DUE SEPTEMBER 30, 2003
FOR VALUE RECEIVED, the Company promises to pay to THE SHAAR FUND LTD., the
registered holder hereof (the "Holder"), the principal sum of Four Million
Ninety-Two Thousand Nine Hundred Twenty and 00/100 ($4,092,920.00) Dollars, on
September 30, 2003 (the "Maturity Date"), and to pay interest at the rate of 10%
per annum from time to time in arrears on the outstanding principal balance due
hereunder, commencing September 30, 2002 and thereafter on the 30th day of April
and September (each an "Interest Payment Date") until the Maturity Date. Accrual
of interest shall commence on the first such business day to occur after the
date hereof and shall continue until payment in full of the principal sum has
been made or duly provided for on a 360 day basis. The principal of, and
interest on, this Note are payable in such 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 last appearing on the Note Register of the Company
as designated in writing by the Holder from time to time. The Company will pay
the principal of and interest upon this Note on the Maturity Date or the
Interest Payment Date as may be applicable, less any amounts required by law to
be deducted, to the registered holder of this Note as of the tenth day prior to
the such date and addressed to such holder at the last address appearing on the
Note Register. The forwarding of such check shall constitute a payment of
principal and interest hereunder and shall satisfy and discharge the liability
for principal and interest on this Note to the extent of the sum represented by
such check plus any amounts so deducted.
This Note is subject to the following additional provisions:
1. (a) The Company acknowledges that there has been received on the date
hereof, the sum of $1,065,000.00, (the "Loan") which together with the
obligations of the Company to the Investor on the Prior Notes in the sum of
$3,027,920.00 constitutes the principal amount of this Note.
(b) This Note is being issued pursuant to the Terms of a Funding
Agreement between the Company and The Shaar Fund Ltd, dated as of November 26,
2001 Terms not otherwise defined herein shall have the meanings ascribed to them
in the Funding Agreement.
2. The Company shall be entitled to withhold from all payments of principal
of, and interest on, this Note any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and Holder shall execute and deliver all
required documentation in connection therewith.
3. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "Act"), and other applicable
state and foreign securities laws. In the event of any proposed transfer of this
Note, the Company may require, prior to issuance of a new Note in the name of
such other person, that it receive reasonable transfer documentation including
legal opinions that the issuance of the Note in such other name does not and
will not cause a violation of the Act or any applicable state or foreign
securities laws. Prior to due presentment for transfer of this Note, the Company
and any agent of the Company may treat the person in whose name this Note is
duly registered on the Company's 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 be overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.
4. 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 time, place, and rate, and in the coin or
currency, herein prescribed. This Note is a direct obligation of the Company.
5. A. At the Holder's election, at any time during the term of this Note or
at maturity the Holder is entitled to convert the principal amount of this Note
and accrued interest, provided that the principal amount is at least US $10,000
(unless if at the time of such election to convert the aggregate principal
amount of all Notes registered to the Holder is less that Ten Thousand Dollars
(US $10,000), then the whole amount thereof) into shares of Common Stock of the
Company "Conversion Shares") at a conversion price of $.75 for each share of
Common Stock ("Conversion Price"), by telecopying an executed and completed
Notice of Conversion in the form attached hereto as Exhibit A. Conversion shall
be deemed to have been effected at on the date the Notice of Conversion is
telecopied and received by the Company and at such time the rights of the Holder
under this Note shall cease to the extent of such conversion.
B. (i) Notwithstanding any other provision hereof to the contrary, the
Company shall have the right to prepay, in whole or in part, the then
outstanding principal amount of the Notes then held by the Holder for an amount
(the "Redemption Amount") equal to the sum of (a) the principal of the Notes
being repaid and (b) all accrued but unpaid interest thereon through the date
the Redemption Amount is paid to the Holder (the "Redemption Payment Date"), The
Company shall give at least fifteen (15) business days, but not more than twenty
(20) business days, written notice of such redemption to the Holder (the "Notice
of Redemption").
(ii) With respect to any Notes for which a Notice of Conversion
is submitted to the Company prior to the Redemption Payment Date, the Notice of
Conversion shall take precedence and such Notes shall be converted in accordance
with the terms hereof. Furthermore, in the event such Redemption Payment is not
timely made, the Notice of Redemption shall be null and void, and any rights of
the Company to thereafter redeem outstanding Notes shall be subject to the
deposit of the Redemption Amount, in escrow, with an attorney designated by the
Holder , within 2 business days of delivery of any Notice or Redemption .
C. For so long as this Note is outstanding, if the Company issues and
sells (A) Common Shares at a purchase price that is lower than $.75 per share,
(B) warrants or options with an exercise price that is lower than $.75, or (C)
convertible, exchangeable or exercisable securities with a right to exchange at
lower than $.75 per share on the date of issuance of such convertible,
exchangeable or exercisable securities, then the Conversion Price shall be
reduced to equal the lowest of any such lower price. Notwithstanding the
foregoing, the following issuances of securities shall not be subject to this
Section: issuances pursuant to options, warrants, other convertible securities
or other obligations outstanding or in existence as of the date hereof;
issuances pursuant to any of the Company's option plans existing on the date
hereof; issuances for which adjustment is made pursuant to other provisions
hereof; and issuances of up to an additional 850,000 shares of Common Stock (or
options or warrants to purchase same) issued subsequent to October 1, 2001 to
consultants or other persons providing services to the Company. In the case of
the issuance of Common Stock (otherwise than upon the conversion of shares of
capital stock or other securities of the Corporation) for a consideration in
whole or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors, irrespective of any
accounting treatment; provided that such fair value as determined by the Board
of Directors shall not exceed the aggregate Current Market Price of the shares
of Common Stock being issued as of the date the Board of Directors authorizes
the issuance of such shares.
D. In case of any stock split or reverse stock split, stock dividend,
reclassification of the Common Stock, recapitalization, or like capital
adjustment affecting the Common Stock of the Company (each, an "Adjustment"),
the Conversion Price in effect at the time of the effective date for such
Adjustment shall be proportionally adjusted so that the Holder of this Note
converted after such date shall be entitled to receive the aggregate number and
kind of shares which, if this Note had been converted by such Holder immediately
prior to such date, the Holder would have owned upon such conversion and been
entitled to received upon such Adjustment (and for such purposes the Holder
shall, to the extent relevant, be deemed to have converted this Note immediately
prior to the record date or the effective date, as the case may, for the
Adjustment). For example, if the Company declares a 2:1 stock dividend or stock
split and the Conversion Price immediately prior to the record date for such
Adjustment was $.75 per share, the adjusted Conversion Price immediately after
the Adjustment would be $.375 per share. Such adjustment may be made
successively if there is more than one Adjustment. In all other respects the
provisions of this Section shall be applied in a fair, equitable and reasonable
manner
so as to give effect, as nearly as may be, to the purposes hereof. A rights
offering to stockholders shall be deemed a stock dividend to the extent of the
bargain purchase element of the rights.
E. If, for any reason, prior to the conversion of this Note in full,
the Company spins off or otherwise divests itself of a part of its business or
operations or disposes all or of a part of its assets in a transaction (the
"Spin Off") in which the Company does not receive compensation for such
business, operations or assets, but causes securities of another entity (the
"Spin Off Securities") to be issued to security holders of the Company, then the
Company shall cause (i) to be reserved Spin Off Securities equal to the number
thereof which would have been issued to the Holder had all of the Holder's
unconverted Notes outstanding on the record date (the "Record Date") for
determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Notes") been converted as of
the close of business on the trading day immediately before the Record Date (the
"Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Notes, such amount of the Reserved
Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a
fraction, of which (I) the numerator is the amount of the Outstanding Notes then
being converted, and (II) the denominator is the amount of the Outstanding
Notes. Whenever the Conversion Price shall be adjusted as provided herein, the
Company shall forthwith file, at the principal office of the Company, a
statement showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment, and the Company
shall also cause a copy of such statement to be sent by mail, first class
postage prepaid, to each other party hereto, at its address appearing on the
Company's records. Each such statement shall be signed by the Company's
independent public accountants, if applicable.
F .Conversion of this Note may be exercised, in whole or in part, by
the Holder by telecopying an executed and completed notice of conversion.
Interest accrued or accruing from the Issue Date to the date of conversion
shall, at the option of the Holder, be paid in cash or Common Stock upon
conversion at the Conversion Price. No fractional shares of Common Stock or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Holder faxes the conversion notice ("Notice of
Conversion"), substantially in the form annexed hereto as Exhibit A, duly
executed, to the Company.. Facsimile delivery of the Notice of Conversion shall
be accepted by the Company at facsimile number (000) 000-0000; ATTN: Chief
Financial Officer. Certificates representing Common Stock upon conversion will
be delivered within five (5) business days from the date the Notice of
Conversion is delivered to the Company's transfer agent or the Company.
G. From and after the date of the filing of the Certificate of
Amendment pursuant to Section 7(k) of the Funding Agreement, the Company shall
have at all times authorized and reserved for issuance, free from preemptive
rights, shares of Common Stock sufficient to yield the number of shares of
Common Stock issuable at conversion as may be required to satisfy the conversion
rights based on the Conversion Price as in effect from time to time, pursuant to
the terms and conditions of the maximum face of the Notes and accrued interest
to maturity. Until the filing of such Certificate, the Company shall not issue
any authorized but unissued shares except upon conversion of this Note or other
convertible securities due and owing to the Holder.
6. Notwithstanding any other provision hereof, or of any of the other
Transaction Agreements, in no event (except (i) as specifically provided in this
Agreement as an exception to this provision, or (ii) while there is outstanding
a tender offer for any or all of the shares of the Company's Common Stock) shall
the Holder be entitled to convert this Note or shall the Company have the
obligation, to deliver Conversion Shares to the extent that, after such exercise
or delivery, 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 unconverted part of
the Note, any other convertible security or unexercised Warrants) would result
in beneficial ownership by the Holder and its affiliates of more than 4.99% of
the outstanding shares of Common Stock (after taking into account the shares to
be issued to the Holder upon such exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
Xxxxxx further agrees that if Xxxxxx transfers or assigns any of the Shares to a
party who or which would not be considered such an affiliate, such assignment
shall be made subject to the transferee's or assignee's specific agreement to be
bound by the provisions of this section as if such transferee or assignee were
the original Holder hereof. Nothing herein shall preclude the Holder from
disposing of a sufficient number of other shares of Common Stock beneficially
owned by the Holder so as to thereafter permit the conversion of this Note.
7. The Holder of the Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Note except under circumstances which will not result
in a violation of the Act or any applicable state Blue Sky or foreign laws or
similar laws relating to the sale of securities. The exercise by Holder of or
failure to so exercise any authority granted herein shall in no manner affect
Company's liability to Holder, and provided, further, that Holder shall be under
no obligation or duty to exercise any of the powers hereby conferred upon them
and they shall be without liability for any act or failure to act in connection
with the collection of, or the preservation of, any rights under any of the
Collateral.
8. 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 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.
9. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or
interest on this Note and same shall continue for a period
of five (5) business days; or
b. Any of the representations or warranties made by the Company
herein, or in any certificate or financial or other written
statements heretofore or hereafter furnished by the Company
in connection with the execution and
delivery of the Funding Agreement, the Exchange Agreement,
or this Note shall be false or misleading in any material
respect at the time made; or
c. The Company shall fail to perform or observe, in any
material respect, any other covenant, term, provision,
condition, agreement or obligation of the Funding Agreement
or this Note, and such failure shall continue uncured for a
period of ten (10) business days after written notice from
the Holder of such failure; or
d. The Company shall fail to perform or observe, in any
material respect, any covenant, term, provision, condition,
agreement or obligation of the Company hereunder, and such
failure shall continue uncured for a period of thirty (30)
days after written notice from the Holder of such failure;
or
e. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment
for the benefit of creditors or commence proceedings for its
dissolution; or (3) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or
business without its consent and shall not be discharged
within ninety (90) days after such appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company and shall not be dismissed within ninety (90) days
thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of Two Hundred Thousand ($200,000)
Dollars in the aggregate shall be entered or filed against
the Company or any of its properties or other assets and
shall remain unpaid, unvacated, unbonded or unstayed for a
period of ninety (90) days or in any event later than five
(5) business days prior to the date of any proposed sale
thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within ninety
(90) days after such institution or the Company shall by any
action or answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations of, or
default in answering a petition filed in any such
proceeding; or
j. The Company shall have its Common Stock suspended or
delisted from an exchange or other trading market from
trading for in excess of ten (10) trading days.
k. The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of
Common Stock upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this
Note, fails to transfer or to cause its Transfer Agent to
transfer any certificate for shares of Common Stock issued
to the Holder upon conversion of this Note and when required
by this Note or the Registration Rights Agreement, and such
transfer is otherwise lawful, or fails to remove any
restrictive legend or to cause its Transfer Agent to
transfer on any certificate or any shares of Common Stock
issued to the Holder upon conversion of this Note as and
when required by this Note, the Agreement or the
Registration Rights Agreement and such legend removal is
otherwise lawful, and any such failure shall continue
uncured for five (5) business days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Note immediately due and payable within five (5) business days of written notice
by Holder to the Company, without presentment, demand, protest or notice of any
kinds, all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and the Holder
may immediately enforce any and all of the Holder's rights and remedies provided
herein or any other rights or remedies afforded by law.
10. Upon failure to make any payment of any installment of principal or
interest when due hereunder, Company further promises to pay, automatically on
all installments of principal and interest which are not timely paid when due,
and until such payment default is cured and on the then outstanding principal
balance, additional interest in addition to the rate set forth hereinabove, so
that interest will then accrue at a rate equal to fifteen (15%) percent per
annum.
11. Any interest rate provided for hereunder which exceeds the maximum rate
provided by applicable law shall instead be deemed to be such maximum rate and
any interest in excess of such maximum rate paid to Holder shall be applied to
reduce the principal balance of this Note so that in no event shall Holder
receive or be entitled to receive interest in excess of the maximum amount
permitted by applicable law.
12. Nothing contained in this Note shall be construed as conferring upon
the Holder the right to vote or to receive dividends or to consent or receive
notice as a shareholder in respect of any meeting of shareholders or any rights
whatsoever as a shareholder of the Company, unless and to the extent converted
in accordance with the terms hereof.
13. The obligation of the Company for payment of principal, interest and
all other sums hereunder is secured by Security Interest Provisions between the
Company and the Holder as set forth in the Annex hereto.
14. The Company and the Holder hereby waive a trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other in respect of any matter arising out of or in connection with the Note.
15. The Holders books and records as to the amounts advanced hereunder and
the date of such advances shall be conclusive evidence thereof.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: November 26, 2001
SAC TECHNOLOGIES, INC.
By:________________________
___________________________
(Print Name)
___________________________
(Title)
[FORM OF CONVERSION NOTICE]
TO:
---------------------------------
---------------------------------
---------------------------------
The undersigned hereby instructs the Company to convert the portion of
the Note specified above into Shares of Common Stock Issued at Conversion in
accordance with the provisions of Section 5 of the Note. The undersigned directs
that the Common Stock issuable and certificates therefor deliverable upon
conversion, the Note recertificated in the principal amount, if any, not being
surrendered for conversion hereby, together with any check in payment for
fractional Common Stock, be issued in the name of and delivered to the
undersigned unless a different name has been indicated below. All capitalized
terms used and not defined herein have the respective meanings assigned to them
in the Note.
By delivering this conversion notice, the undersigned owner represents
and warrants that it does not now, nor after giving effect to this conversion
notice will it, beneficially own in excess of 4.99% of the outstanding shares of
Common Stock of the Company within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended.
Date ___________________________________________________________________
Signature ______________________________________________________________________
[Name]
Address: _______________________________________________________________________
_______________________________________________________________________
