Exhibit 10.01
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 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 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO VERSACOM INTERNATIONAL, INC., THAT SUCH REGISTRATION IS NOT
REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, VERSACOM INTERNATIONAL, INC., a Utah corporation
(hereinafter called the "Borrower"), hereby promises to pay to LAURUS MASTER
FUND, LTD., c/o Onshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate
House, South Church Street, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"Holder") on order, without demand, the sum of Three Hundred Thousand Dollars
($300,000), with simple interest accruing at the annual rate of 8%, on October
17, 2003 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a five (5)
day grace period to pay any monetary amounts due under this Note, after which
grace period a default interest rate of twenty percent (20%) per annum shall
apply to the amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth
in Article II shall remain in full force and effect from the Effective Date, as
defined in the Purchase Agreement, up until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to convert,
interest payable on this Note shall accrue at the annual rate of eight percent
(8%) and be payable in arrears commencing December 31, 2001 and quarterly
thereafter, and on the Maturity Date, accelerated or otherwise, when the
principal and remaining accrued but unpaid interest shall be due and payable, or
sooner as described below.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal
amount and interest due under this Note into Shares of the Borrower's Common
Stock as set forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right after the Effective Date,
as defined in the Purchase Agreement, and then at any time until this Note is
fully paid, to convert any outstanding and unpaid principal portion of this
Note, and at the Holder's election, the interest accrued on the Note, (the date
of giving of such notice of conversion being a "Conversion Date") into fully
paid and nonassessable shares of common stock of the Borrower as such stock
exists on the date of issuance of this Note, or any shares of capital stock of
the Borrower into which such stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion price as defined in Section 2.1(b) hereof
(the "Conversion Price"), determined as provided herein. Upon delivery to the
Borrower of a Notice of Conversion as described in Section 8 of the Securities
Purchase Agreement entered into between the Borrower and certain persons who are
signatories thereto, including the Holder, relating to this Note (the "Purchase
Agreement") of the Holder's written request for conversion, the Borrower shall
issue and deliver to the Holder within three business days from the Conversion
Date that number of shares of Common Stock for the portion of the Note converted
in accordance with the foregoing. At the election of the Holder, the Borrower
will deliver accrued but unpaid interest on the Note through the Conversion Date
directly to the Holder on or before the Delivery Date (as defined in the
Purchase Agreement). 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 of the Note to be converted and interest, if any, by the Conversion
Price.
(b) Subject to adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per share shall be the lower of (i) $.23 (the
"Maximum Base Price"); or (ii) eighty percent (80%) of the average of the three
lowest closing prices for the Common Stock on the NASD OTC Bulletin Board,
NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange,
or New York Stock Exchange (whichever of the foregoing is at the time the
principal trading exchange or market for the Common Stock, the "Principal
Market"), or if not then trading on a Principal Market, such other principal
market or exchange where the Common Stock is listed or traded, for the thirty
(30) trading days prior to but not including the Conversion Date.
(c) The Maximum Base Price described in Section 2.1(b)(i)
above and number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or
substantially all its assets to any other corporation, this Note,
as to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to
purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with
respect to the securities subject to the conversion or purchase
right immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly apply to
successive transactions of a similar nature by any such successor
or purchaser. Without limiting the generality of the foregoing,
the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower 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 portion thereof
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
immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares
of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is
paid on the Common Stock in shares of Common Stock, the
Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately
increased in the case of combination of shares, in each such case
by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total
number of shares of Common Stock outstanding immediately prior to
such event.
D. Share Issuance. Subject to the provisions of this
Section, if the Borrower at any time shall issue any shares of
Common Stock prior to the conversion of the entire principal
amount of the Note (otherwise than as: (i) provided in Sections
2.1(c)A, 2.1(c)B or 2.1(c)C or this subparagraph D; or (ii)
pursuant to options, warrants, or other obligations to issue
shares, outstanding on the date hereof as set forth in the
Schedules to the Purchase Agreement (which agreement is
incorporated herein by this reference); ((i) and (ii) above, are
hereinafter referred to as the "Existing Option Obligations") for
a consideration less than the Conversion Price that would be in
effect at the time of such issue, then, and thereafter
successively upon each such issue, the Conversion Price shall be
reduced as follows: (i) the number of shares of Common Stock
outstanding immediately prior to such issue shall be multiplied
by the Conversion Price in effect at the time of such issue and
the product shall be added to the aggregate consideration, if
any, received by the Borrower upon such issue of additional
shares of Common Stock; and (ii) the sum so obtained shall be
divided by the number of shares of Common Stock outstanding
immediately after such issue. The resulting quotient shall be the
adjusted conversion price. Except for the Existing Option
Obligations and options that may be issued under any employee
incentive stock option and/or any qualified stock option plan
adopted by the Borrower, for purposes of this adjustment, the
issuance of any security of the Borrower carrying the right to
convert such security into shares of Common Stock or of any
warrant, right or option to purchase Common Stock shall result in
an adjustment to the Conversion Price upon the issuance of shares
of Common Stock upon exercise of such conversion or purchase
rights.
(d) During the period the conversion right exists, the
Borrower will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of Common Stock upon the full
conversion of this Note. The Borrower represents that upon issuance, such shares
will be duly and validly issued, fully paid and non-assessable. The Borrower
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 shares of Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the
Holder in whole or in part as described in Section 2.1(a) hereof and the
Purchase Agreement. Upon 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 Borrower to the Holder for the principal balance of this Note
and interest which shall not have been converted or paid.
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default
("Event of Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, all without demand, presentment
or notice, or grace period, all of which hereby are expressly waived, except as
set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails
to pay any installment of principal or interest hereon or on any other
promissory note issued pursuant to the Purchase Agreement, when due and such
failure continues for a period of five (5) days after the due date.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note in any material respect and
such breach, if subject to cure, continues for a period of seven (7) days after
written notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Purchase
Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection therewith shall be false or misleading.
3.4 Receiver or Trustee. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final
process shall be entered or filed against the Borrower or any of its property or
other assets for more than $50,000, and shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower.
3.7 Delisting. Delisting of the Common Stock from the
Principal Market or such other principal exchange on which the Common Stock is
listed for trading; the Borrower's failure to comply with the conditions for
listing; or notification that the Borrower is not in compliance with the
conditions for such continued listing.
3.8 Concession. A concession by the Borrower, after applicable
notice and cure periods, under any one or more obligations in an aggregate
monetary amount in excess of $50,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market
trading suspension.
3.10 Failure to Deliver Common Stock or Replacement Note. The
Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 8 of the Purchase Agreement, or if
required a replacement Note.
3.11 Registration Default. The occurrence of a Non-
Registration Event as described in Section 9.4 of the Purchase Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 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.
4.2 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 Borrower at the address as set forth on the signature page to the
Purchase Agreement executed in connection herewith and to the Holder at the
address set forth on the signature page to the Purchase Agreement for such
Holder, with a copy to Xxxxxx X. Xxxxxx, Esq. 000 Xxxx 00xx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, Xxx Xxxx 00000, xxxxxxxxx number (000) 000-0000, or at such other
address as the Borrower 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 Borrower pursuant to the Purchase Agreement.
4.3 Amendment Provision. The term "Note" and all reference
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.
4.4 Assignability. This Note shall be binding upon the
Borrower 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.
4.5 Cost of Collection. If default is made in the payment of
this Note, the Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individual signing this Note on
behalf of the Borrower agree to submit to the jurisdiction of such courts. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. 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 unenforceability of any other provision
of this Note.
4.7 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
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
4.8 Prepayment. This Note may not be paid (in whole or in
part) prior to the Maturity Date except with the consent of the Holder.
4.9 Security Interest. The holder of this Note has been
granted a security interest in common stock of the Borrower more fully described
in a Security Agreement.
4.10 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name by its Chief Executive Officer on this 17th day of October, 2001.
VERSACOM INTERNATIONAL, INC.
By:________________________________
WITNESS:
-------------------------------
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by Versacom International,
Inc. on October 17, 2001 into Shares of Common Stock of Versacom International,
Inc. (the "Company") according to the conditions set forth in such Note, as of
the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
