Exhibit 4.41
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD WITHOUT
REGISTRATION UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN
EFFECT AS TO SUCH TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER
STATE AND FEDERAL LAW IS AVAILABLE.
C O N V E R S I O N A G R E E M E N T
X.XXXXXXX CORPORATION
X.XXXXXXX CORPORATION
00000 Xxxxxxx Xxxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000 ___________________, 2002
(Must be dated)
Attention:
Xx. Xxxx Xxxx, Chief Executive Officer $____________________________
(Amount of Notes Converted)
Gentlemen:
1. CONVERSION. I, the undersigned individual or entity ("NOTEHOLDER"),
hereby irrevocably converts as of the above date the above stated dollar amount
of __% Promissory Notes due __________, 200_ (individually a "NOTE" and
collectively, the "NOTES") of X.XXXXXXX CORPORATION, a Delaware corporation
("COMPANY") into ___________ shares of Series D Preferred Stock, $.001 par value
(the "SERIES D PREFERRED STOCK"). This Conversion is made in accordance
with and is subject to (i) the terms of this Conversion Agreement and (ii) the
Company's Certificate of Incorporation and Bylaws, each as amended to date.
2. ACCEPTANCE OF CONVERSION. This Conversion Agreement does not constitute
an offer by the Company to sell any shares of Series D Preferred Stock to me,
nor a solicitation of any offer from me to buy any shares of Series D Preferred
Stock, and shall be deemed accepted by the Company only when countersigned by an
executive officer of the Company. The Company may reject this Conversion, in
whole or in part, for any reason in its sole discretion. I understand the
Company has agreed to accept or reject this Conversion within 15 days of receipt
by the Company of this duly executed Conversion Agreement together with the
original Note. After such 15 days, if not accepted by the Company, I may revoke
this Conversion Agreement by notice in writing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Noteholder as of the date of this Conversion
Agreement as follows:
(A) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Conversion Agreement and to issue and sell the Securities, as hereinafter
defined, and to carry out the provisions of this Conversion Agreement and to
carry on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its business.
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(B) SUBSIDIARIES. The Company operates through its wholly-owned subsidiary,
x.Xxxxxxx Corporation (a California corporation) and has no ownership in other
companies. The Company is not a participant in any joint venture, partnership or
similar arrangement.
(C) CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company consists of 200,000,000 shares of Common Stock, par value $.001 per
share ("COMMON STOCK"), and 5,000,000 shares of preferred stock, par value $.001
per share ("PREFERRED STOCK"). As of December 23, 2002 the Company had no shares
of preferred stock outstanding. As of December 23, 2002, the Company had
141,951,795 shares of Common Stock outstanding. An additional 7,098,663 shares
of Common Stock are reserved for future issuance under the Company's stock
option grants and pursuant to certain convertible securities, options and
warrants. Accordingly, the Company has either outstanding or reserved an
aggregate of 149,050,458 of the 200,000,000 authorized shares of Common Stock.
All issued and outstanding shares of the Company's Common Stock (a) have
been duly authorized and validly issued, and (b) are fully paid and
nonassessable. When issued in compliance with the provisions of this Conversion
Agreement, the Series D Preferred Stock and the Conversion Shares, as
hereinafter defined, will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances; provided, however, that the Series D
Preferred Stock and the Conversion Shares may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
(D) RESERVATION OF SHARES. The Conversion Shares issuable upon conversion
of the Series D Preferred Stock have been duly authorized and reserved for
future issuance.
(E) AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization of this Conversion Agreement, the performance of all obligations
of the Company hereunder and thereunder at the Closing or Closings and the
authorization, sale, issuance and delivery of the Securities pursuant hereto and
the Conversion Shares on conversion of the Series D Preferred Stock has been
taken or will be taken prior to the Closing. The Conversion Agreement when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and (b) general
principles of equity that restrict the availability of equitable remedies. The
sale of the Series D Preferred Stock and the subsequent conversion thereof are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with.
(F) SEC REPORTS AND FILINGS. The Company has delivered to Noteholder a
complete and accurate copy (excluding copies of exhibits) of its Annual Report
on Form 10-KSB for the fiscal year ended March 31, 2002, the latest Quarterly
Report on Form 10-Q for the period ended September 30, 2002 and definitive proxy
statement filed by the Company on September 22, 2002 (the "SEC DOCUMENTS"). The
SEC Documents (i) complied with the requirements of the Securities Act of 1933,
as amended (the "SECURITIES ACT") or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), as the case may be, at and as of the times they
were filed (or, if amended or superseded by a filing prior to the date of this
Conversion Agreement, then on the date of such filing) in all material respects
and (ii) did not at and as of the time they were filed (or, if amended or
superseded by a filing prior to the date of this Conversion Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(G) CHANGES. Since the date of the last of the SEC Documents, there has
been no material adverse change in the business, operations or financial
condition of the Company.
(H) TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the SEC Documents,
and good title to its leasehold estates, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (a) those resulting from
taxes which have not yet become delinquent, (b) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto
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or materially impair the operations of the Company, and (c) those that have
otherwise arisen in the ordinary course of business. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company are in good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used.
(I) COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or
default of any term of its Certificate of Incorporation or Bylaws, or of any
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which would materially and adversely affect the
business, assets, liabilities, financial condition or operations of the Company.
The execution, delivery, and performance of and compliance with this Conversion
Agreement and the issuance of the Series D Preferred Stock pursuant hereto and
of the Conversion Shares, will not, with or without the passage of time or
giving of notice, result in any such material violation, or be in conflict with
or constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
(J) LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened in writing against
the Company that questions the validity of this Conversion Agreement or the
right of the Company to enter into any of such agreement, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing.
(K) EMPLOYEES. The Company has no collective bargaining agreements with any
of its employees. There is no labor union organizing activity pending or, to the
Company's knowledge, threatened with respect to the Company.
(L) COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition or operations of the Company. No governmental
orders, permissions, consents, approvals or authorizations are required to be
obtained and no registrations or declarations are required to be filed in
connection with the execution and delivery of this Conversion Agreement and the
issuance of the Series D Preferred Stock, except such as has been duly and
validly obtained or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. The Company has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company and believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted.
4. REPRESENTATIONS AND WARRANTIES OF NOTEHOLDER. With full knowledge that
the Company and its officers, directors and controlling persons will be relying
upon the following, among other things, in determining that a sale of Series D
Preferred Stock to me will be exempt from the registration requirements of the
Securities Act, and applicable state securities laws, I represent and warrant to
the Company that:
(A) COMPANY INFORMATION. I have received and carefully reviewed the SEC
Documents in their entirety provided to me by the Company. I understand that I
and my adviser(s) have had a reasonable opportunity to ask questions of and
receive answers from the Company, or a person or persons acting on its behalf,
concerning my election to convert the principal amount of the Notes set forth
above into the shares of Series D Preferred Stock as set forth hereinabove, and
all such questions have been answered to my or their full satisfaction. I
acknowledge and agree that I have been provided with, or offered complete access
to, information concerning the Company, its business, financial condition and
prospects, and the offering of the Series D Preferred Stock, equivalent to such
information as would have been contained in a registration of the Series D
Preferred Stock under the Securities Act. I have not been furnished with any
other oral or written information concerning the Company or offering other than
the SEC Documents or as described in this paragraph and I have relied solely on
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the foregoing in connection with my decision to convert the principal amount of
the Notes set forth above into the shares of Series D Preferred Stock. I
acknowledge that no representations or warranties have been made to me by the
Company or persons acting on behalf of the Company, other than the
representations set forth in this Conversion Agreement and in the SEC Documents.
(B) PREFERRED STOCK; LIMITATIONS. I acknowledge that the shares of Series D
Preferred Stock are subject to the limitations set forth in the Certificate of
Designation of Preferences, Rights and Limitations filed with the Secretary of
State for the State of Delaware on or about December 24, 2002 (the "CERTIFICATE
OF DESIGNATION"). I also acknowledge that the shares of Series D Preferred Stock
are convertible at my election and at the election of the Company in certain
instances into fully paid and nonassessable shares of Common Stock, such shares
issued on conversion being the "CONVERSION SHARES."
(C) RESTRICTED SECURITIES. I acknowledge that the Series D Preferred Stock
and Conversion Shares (collectively, the "SECURITIES") have not been registered
under the Securities Act, in reliance upon the exemption from registration
provided by Rule 506 of Regulation D under the Securities Act, and under the
securities or blue sky laws of any state or any rules or regulations promulgated
thereunder, on the grounds that the offer and sale of such securities to me is a
transaction not involving any public offering. The Series D Preferred Stock
which I am acquiring hereby is, and the Conversion Shares on issuance thereof
will be, "restricted securities," as that term is defined in Rule 144(a) under
the Securities Act. I acknowledge and understand that the Securities are
unregistered and must be held by me indefinitely, unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available for their resale. I understand and agree that the prior written
consent of the Company will be necessary for any transfer by me of the
Securities, in whole or in part, unless the Securities have been duly registered
under the Securities Act or the transfer is made in accordance with Rule 144
under the Securities Act.
(D) LEGEND. I understand and agree that the Series D Preferred Stock shall,
unless and until removed in accordance with applicable law, contain a legend
substantially in the following form, which I have read and understand:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities laws, and
are "restricted securities" as defined in Rule 144 under the Act.
These securities may not be offered, sold, transferred, pledged or
hypothecated in the absence of an effective registration statement for
such securities under the Act or an opinion of counsel satisfactory to
the Company that an exemption from such registration is available."
I understand that the certificate representing the Conversion Shares shall
contain a similar restrictive legend.
(E) REGISTRATION. I understand that only the Company can file a
registration statement under the Securities Act covering the Conversion Shares.
(F) NOTEHOLDER CAN BEAR ECONOMIC RISK. I represent and warrant to the
Company in connection with my conversion of the Note and the acquisition of the
Series D Preferred Stock that (i) I have adequate means of providing for my
current needs and possible personal contingencies, and this investment will not
necessitate any change in my standard of living, (ii) I have no present need for
liquidity in this investment, (iii) I am able to bear the economic risks of
investment in the Note for an indefinite period, and (iv) at this time could
afford a complete loss of this investment.
(G) INVESTMENT HAS SUBSTANTIAL RISK. I recognize that an investment in the
Series D Preferred Stock is speculative and involves a high degree of risk. I
have considered among other risks those risks described in the SEC Documents.
(H) ACQUISITION FOR OWN ACCOUNT; ABLE TO PROTECT OWN INTEREST. The shares
of Series D Preferred Stock are being acquired solely for my own account, for
investment, and not for the account of any other person and not with any
intention to make any distribution or public offering of such securities. I (and
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if I am an entity, then the individual making this investment decision on my
behalf), alone or together with my adviser(s), have such knowledge and
experience in financial, tax and business matters as to enable me to utilize the
information made available to me in order to evaluate the merits and risks of
the prospective investment in the Series D Preferred Stock to make an informed
investment decision with respect thereto.
(I) AUTHORITY; RESIDENCE. I, if a corporation, partnership, trust or other
entity, have full power and authority to execute this Conversion Agreement, to
make all representations, warranties and covenants set forth herein and to
acquire and hold the Series D Preferred Stock, and have my principal office as
set forth on the signature page hereof; and this entity has not been formed for
the specific purpose of acquiring the Series D Preferred Stock. I, if an
individual, am at least 21 years of age, and I reside at the place set forth on
the signature page hereof.
(J) RELIANCE BY COMPANY. All information which I have provided to the
Company is correct and complete as of the date set forth above and may be relied
upon by the Company in determining the availability of an exemption from
registration under federal and state securities laws in connection with the
offering of securities as described herein and, if there should be any adverse
change in such information prior to this Conversion Agreement being accepted, I
will immediately provide the Company with such information.
(K) NO GENERAL SOLICITATION OR ADVERTISING. I have not been solicited by
the Company or anyone on its behalf by any form of general solicitation or
general advertising, including but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio, or made available over
telephone lines by any information service, or (ii) any seminar or meeting whose
attendees had been invited by any means of general solicitation or general
advertising.
(L) INVESTMENT INTENT. The Series D Preferred Stock is being acquired for
long-term investment only for my own account and not with a view to, or for sale
in connection with, any distribution of the Series D Preferred Stock or any
Conversion Shares. I do not have any present intention of distributing or
selling any of the Series D Preferred Stock or any interest therein.
5. INDEMNIFICATION. I agree to indemnify and hold the Company, its officers,
directors and every person who "CONTROLS" the Company within the meaning of
Section 15 of the Securities Act ("CONTROLLING PERSONS") harmless from and
against all damages, losses, costs and expenses (including reasonable attorneys'
fees) which they or any one of them may incur by reason of my failure to fulfill
or my breach of any of the terms or conditions of this Conversion Agreement, or
by reason of any breach of or the falsity, inaccuracy, or failure of any
representation or warranty made by me herein, made in any document provided by
me to the Company in connection with this Conversion, or otherwise made by me
orally or in writing to the Company.
6. REGISTRATION RIGHTS On or before June 30, 2003, the Company shall undertake
to file a registration statement for the resale of the Conversion Shares with
the Securities and Exchange Commission ("SEC") on Form S-3 or other appropriate
form, and will utilize commercially reasonable efforts to make such registration
statement effective as soon as possible thereafter. In the event that the
foregoing registration statement is not declared effective, the Noteholder shall
have the following additional registration rights with respect to the Conversion
Shares:
(a) If, at any time from issuance to December 31, 2007 (the "EXERCISE
PERIOD"), the Company proposes to prepare and file any registration statements
covering its Common Stock (in either case, other than in connection with a
merger or acquisition, pursuant to Form S-8 or any successor form, or pursuant
to any other form or type of registration in which Registrable Securities (as
defined below) cannot be appropriately included) (collectively, the
"REGISTRATION STATEMENTS"), it will give written notice as provided herein at
least thirty (30) days prior to the filing of each such Registration Statement
to the then holders of the Series D Preferred Stock and/or Conversion Shares
("HOLDER") of its intention to do so. If the Holders of the Series D Preferred
Stock and/or Conversion Shares notify the Company within twenty (20) days after
receipt of any such notice of its or their desire to include the Conversion
Shares (collectively, the "REGISTRABLE SECURITIES") in such proposed
registration statement, the Company shall afford the Holders of the Series D
Preferred Stock and/or Conversion Shares the opportunity to have any such
Registrable Securities registered under such registration statement at the
Company's sole cost and expense.
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(b) Notwithstanding the provisions hereof, the Company shall have the right
at any time after it shall have given written notice pursuant hereto
(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.
(c) Notwithstanding any other provision of this Section 6, if the
underwriter managing such registration notifies the Holders in writing that
market or economic conditions limit the amount of securities which may
reasonably be expected to be sold, the Holders of such Registrable Securities
will be allowed to register their Registrable Securities pro rata based on the
number of shares of Registrable Securities held by such Holders, respectively.
No Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
(d) Each Holder of Conversion Shares to be sold pursuant to any
Registration Statement (each, a "DISTRIBUTING HOLDER") shall severally, and not
jointly, indemnify and hold harmless the Company, its officers and directors,
each underwriter and each person, if any, who controls the Company and such
underwriter, against any loss, claim, damage, expense or liability, joint or
several, as incurred, to which any of them may become subject under the
Securities Act or any other statute or at common law, in so far as such loss,
claim, damage, expense or liability (or actions in respect thereof) arises out
of or is based upon any untrue statement or alleged untrue statement of any
material fact contained in any such Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Distributing Holder specifically for use therein. Such Distributing Holder shall
reimburse the Company, such underwriter and each such officer, director or
controlling person for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such liability, as
incurred. Notwithstanding the foregoing, such indemnity with respect to such
preliminary prospectus or such final prospectus shall not inure to the benefit
of the Company, its officers or directors, or such underwriter (or such
controlling person of the Company or the underwriter) if the person asserting
any such loss, claim, damage, expense or liability purchased the securities that
are the subject thereof and did not receive a copy of the final prospectus (or
the final prospectus as then amended, revised or supplemented) at or prior to
the time such furnishing is required by the Securities Act in any case where any
such untrue statement or omission of a material fact contained in the
preliminary prospectus was corrected in the final prospectus (or, if contained
in the final prospectus, was subsequently corrected by amendment, revision or
supplement).
7. PUBLIC OFFERING LOCK-UP. In connection with any public registration of this
Company's securities, the Holder (and any transferee of Holder) agrees, upon the
request of the Company or the underwriter(s) managing such offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of the Conversion Shares
without the prior written consent of the Company and such underwriter(s), as the
case may be, for a period of time not to exceed on hundred eighty (180) days
from the effective date of the registration. Upon request by the Company, Holder
(and any transferee of Holder) agrees to enter into any further agreement in
writing in a form reasonably satisfactory to the Company and/or such
underwriter(s). The Company may impose stop-transfer instructions with respect
to the securities subject to the foregoing restrictions until the end of said
180-day period. Any Conversion Shares shall bear an appropriate legend
referencing this lock-up provision.
8. PROCEEDINGS. In the event that any cause of action, litigation, legal
proceeding or arbitration proceeding arises out of or in any way results from
this Conversion Agreement for or acquisition of Series D Preferred Stock or
Conversion Shares (collectively, the "PROCEEDING") in which the undersigned is
an adverse party to the Company or any director, officer or controlling person
thereof, the undersigned agrees that:
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(a) he will produce, upon the Company's request such statements, returns
and purchase and sale information as are directly relevant and material to his
investment sophistication, knowledge and experience in business and financial
matters, ability to evaluate the risks and merits of investing in the Series D
Preferred Stock and his status as an accredited investor; and that
(b) the party or parties not prevailing in such Proceeding shall pay all
costs whatever, including reasonable attorney fees, incurred in the defense or
prosecution of any such Proceeding by the party or parties therein prevailing,
it being further agreed that the undersigned will pay all costs and reasonable
attorney fees incurred by any officer, director or controlling person of the
Company who or which prevails in the defense of any Proceeding initiated by the
undersigned. The undersigned further admits and agrees that the documents and
records to be produced pursuant to subparagraph (a) of this Section 8 will not
pose an undue burden upon him nor unduly intrude upon his right of privacy and
are necessary to the defense of the Proceeding by the Company and any directors,
officers or controlling persons thereof involved in the Proceeding.
9. ACCREDITED INVESTOR STATUS. The following categories set forth below
indicate my accreditation status. I have indicated my accreditation status by
initialing all applicable blanks:
TO BE COMPLETED BY U.S. PERSONS ONLY
------------------------------------------
A AND B ARE APPLICABLE TO INDIVIDUALS (Please INITIAL applicable blanks):
A. ____ The undersigned is a natural person and has a net worth, either
alone or with the undersigned's spouse, of more than $1,000,000, and the
undersigned's investment does not exceed ten percent (10%) of his net worth or
joint net worth with the undersigned's spouse.
B. ____ The undersigned is a natural person and had income in excess of
$200,000 ($300,000 including income of spouse) during each of the previous two
years and reasonably expects to have income in excess of such amounts during the
current year, and the undersigned's investment does not exceed ten percent (10%)
of his net worth or joint net worth with the undersigned's spouse.
C THROUGH K ARE APPLICABLE TO NON-INDIVIDUALS (Please INITIAL applicable
blanks):
C. ____ The undersigned is a bank as defined in Section 3(a)(2) of the
Securities Act.
D. ____ The undersigned is a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act, whether
acting in its individual or fiduciary capacity.
E. ____ The undersigned is an insurance company as defined in Section 2(13)
of the Securities Act.
F. ____ The undersigned is an investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940.
G. ____ The undersigned is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958.
H. ____ The undersigned is an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 ("ERISA") that either (i)
has its investment decisions made by a plan fiduciary, as defined by Section
3(21) of ERISA, which is either a bank, savings and loan association, insurance
company or registered investment adviser, or (ii) has total assets in excess of
$5,000,000, or (iii) is a self-directed plan, with investment decisions made
solely by persons that are accredited investors as described herein.
I. ____ The undersigned is a private business development company as defined
by Section 202(a)(22) of the Investment Advisors Act of 1940.
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J. ____ The undersigned is an organization described in Section 501(c)(3) of
the Internal Revenue Code, not formed for the specific purpose of acquiring the
Stock, with total assets in excess of $5,000,000.
K. ____ The undersigned is an entity in which all of the equity owners are
accredited investors within categories A through J above.
I AM NOT AN ACCREDITED INVESTOR (none of the above apply):
______ I AM NOT an accredited investor.
NON U.S. PERSONS. Noteholder, if purchasing in reliance upon Regulation S:
(a) Is not a U.S. Person (as defined in Regulation S) and is not an
affiliate of the Company.
(b) Is located outside the United States, its territories and possessions.
(c) Will not, during the period commencing on the closing date of the
conversion and ending on the day one year (1) year thereafter (the "RESTRICTED
PERIOD"), offer or sell the Series D Preferred Stock or the Conversion Shares in
the United States, its territories or possessions, or to a U.S. Person or for
the account or benefit of a U.S. Person (other than distributors), other than in
accordance with Rule 903 or 904 of Regulation S.
(d) Will, after the expiration of the Restricted Period, offer, sell, pledge
or otherwise transfer the Series D Preferred Stock and/or the Conversion Shares
only pursuant to registration under the Securities Act or an available exemption
therefrom and, in any case, in accordance with applicable state and foreign
securities laws.
(e) None of the Noteholder, its affiliates or any person acting on behalf of
the Noteholder or any such affiliate has engaged, or will engage, in any
Directed Selling Efforts with respect to the Series D Preferred Stock and/or the
Conversion Shares or any distribution, as that term is used in the definition of
Distributor in Rule 902 of Regulation S, with respect thereto.
(f) The transactions contemplated herein (a) have not been pre-arranged with
a purchaser located in the United States, its territories or possessions, or who
is a U.S. Person and (b) are not a part of a plan or scheme to evade the
registration provisions of the Securities Act.
(g) The Noteholder is acquiring the Series D Preferred Stock and/or the
Conversion Shares for its own account for the purpose of investment and not (a)
with a view to, or for sale in connection with, any distribution thereof or (b)
for the account or on behalf of any U.S. Person.
(h) The Noteholder is not a corporation that has been formed principally for
the purpose of investing in securities not registered under the Securities Act.
(i) Neither the Company nor any person acting on its behalf made to the
Noteholder or any person acting on its behalf in the United States any statement
conveying a purpose or intent to sell the Series D Preferred Stock and/or the
Conversion Shares to the Noteholder. The person executing this Conversion
Agreement on behalf of the Noteholder was outside the United States, its
territories and possessions at the time of such execution.
(j) Neither the Noteholder, any affiliate of the Noteholder, nor any person
acting on their behalf has undertaken or carried out any activity for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States, its territories or possessions,
for any of the Series D Preferred Stock and/or the Conversion Shares.
(k) If the Noteholder offers and sells the Series D Preferred Stock and/or
the Conversion Shares during the Restricted Period, then it will do so only; in
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accordance with the provisions of Regulations S; pursuant to registration of the
Stock under the Securities Act; or pursuant to an available exemption from the
registration requirements of the Securities Act.
11. FINANCIAL SOPHISTICATION. I have prior investment experience, including
investments in non-registered securities, or have employed the services of
an investment advisor, attorney or accountant to read all of the documents
furnished or made available by the Company and to evaluate the merits and risks
of an investment in the Series D Preferred Stock on my behalf. I recognize the
highly speculative nature of this investment, and that I must be able to bear
and am able to bear the economic risk I hereby assume
12. CITY AND STATE INFORMATION. This Conversion Agreement for Series D
Preferred Stock was made by me solely in the:
CITY of (please print) _____________________________
STATE of (please print) _____________________________
13. TYPE OF OWNERSHIP (check one):
_____ Individual ____ Estate of a deceased person
_____ Joint Tenants WROS ____ Fiduciary of discretionary account
_____ Tenants in Common ____ Corporation (A.G., S.A.)
_____ Investment Club _____ Limited Partnership
_____ Community Property ____ Limited Liability Partnership (LLP)
_____ Trust ____ General Partnership
_____ Foundation (or Stiftung) ____ Limited Liability Company (or GmbH, SARL)
_____ Bank, Thrift, Sav. & Loan ____ Mutual Fund, Closed-End Fund, Unit Trust
_____ Other (describe:____________________________________________ )
14. ARBITRATION. Any controversy or claim relating to this Conversion
Agreement or my investment in the Series D Preferred Stock shall be resolved
before a panel of three arbitrators selected pursuant to and run in accordance
with the rules then prevailing of the American Arbitration Association. Any such
arbitration shall be held in San Diego, California. The prevailing party in
the arbitration shall be entitled to an award of all expenses and reasonable
attorneys' fees incurred in bringing or defending the arbitration.
15. BLUE SKY QUALIFICATION. Undersigned's right to purchase Shares under
this Conversion Agreement are expressly conditioned upon the exemption from
qualification of the offer and sale of the Shares from applicable Federal and
State securities laws. The Company shall not be required to qualify this
transaction under the securities laws of any jurisdiction and, should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in the
jurisdiction.
16. USE OF PRONOUNS. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
17. MISCELLANEOUS.
(a) I agree not to transfer or assign this Conversion Agreement, or any
interest herein, and further agree that any transfer or assignment of the Series
D Preferred Stock or Conversion Shares shall be made only in accordance with
this Conversion Agreement and all applicable laws. I agree that this conversion
is irrevocable and that I may not cancel, terminate or revoke this Conversion
Agreement or any agreement made by me hereunder.
(b) Notwithstanding any of the representations, warranties, acknowledgments
or agreements made herein by me, I do not thereby or in any other manner waive
any rights granted to me under federal or state securities laws. I stipulate and
agree, however, that the operation of this Conversion Agreement will not result
in a waiver of such rights. All representations, warranties, covenants and
undertakings made by me in this Conversion Agreement shall survive the Company's
acceptance of this Conversion Agreement and the issuance and delivery of the
Series D Preferred Stock and Conversion Shares.
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(c) This Conversion Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and, except as
otherwise set forth in Section 17(i), may be amended only by a writing executed
by both parties. This Conversion Agreement shall be enforced, governed and
construed in all respects in accordance with the laws of the State of California
applicable to contracts between residents of such state entered into and to be
performed entirely within such state.
(d) I acknowledge that this Conversion Agreement does not constitute an
offer to me to buy, an offer of sale, or solicitation of an offer to buy the
Series D Preferred Stock, and that I shall have no right whatever to Convert the
Notes and acquire any Series D Preferred Stock until this Conversion Agreement
affirmatively is accepted by the Company. Neither the mere passage of time nor
failure of the Company to reject this Conversion Agreement shall constitute
acceptance hereof.
(e) Wherever the pronouns he, his or him appear in this Conversion
Agreement, they shall include the feminine and neuter genders as well as the
masculine and apply equally to individual and entity undersigneds, unless the
context clearly requires otherwise.
(f) Notices between the parties shall be effective only if in writing and
delivered: if to the Company, to the address on the first page hereof; and if to
me, to the address on the signature page hereof; or to any subsequent address
provided in writing by either party.
(g) This Conversion Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, administrators, executors,
legal representatives, successors and permitted assigns. By executing this
Conversion Agreement, I represent that I have carefully read it in its entirety.
(h) I understand and acknowledge that this conversion for Series D
Preferred Stock shall be irrevocable until accepted or rejected by the Company
(other than described in Paragraph 2), that it may not be canceled or revoked by
me and that upon the Company's acceptance of this Conversion Agreement I will be
legally bound to take the Series D Preferred Stock on the terms and conditions
set forth herein.
(I) NOTEHOLDER ACKNOWLEDGES THAT THIS CONVERSION AGREEMENT IS ONE OF
SEVERAL AGREEMENTS (COLLECTIVELY, THE "CONVERSION AGREEMENTS") BEING ENTERED
INTO WITH OTHER NOTEHOLDERS (COLLECTIVELY TOGETHER WITH NOTEHOLDER, THE
"NOTEHOLDERS") WITH RESPECT TO THE CONVERSION BY THE COMPANY OF EACH OF THE
OUTSTANDING NOTES INTO SERIES D PREFERRED STOCK. ACCORDINGLY, NOTEHOLDER
EXPRESSLY ACKNOWLEDGES THAT THE COMPANY HAS MADE CERTAIN AGREEMENTS AND
COMMITMENTS HEREUNDER THAT ALSO WERE MADE BY THE COMPANY TO THE OTHER
NOTEHOLDERS AND, IN CONNECTION THEREWITH, EXPRESSLY AGREES THAT IT WILL AMEND OR
MODIFY THIS CONVERSION AGREEMENT AND/OR WAIVE THE OBLIGATIONS OF THE COMPANY
HEREUNDER IN ACCORDANCE WITH (AND AS DETERMINED BY) THE WRITTEN CONSENT OF THE
HOLDERS OF AT LEAST FIFTY-ONE PERCENT (51%) IN THE AGGREGATE PRINCIPAL AMOUNT OF
THE NOTES OUTSTANDING AND THAT SUCH WRITTEN CONSENT SHALL CONSTITUTE A VALID,
BINDING AND ENFORCEABLE AMENDMENT, MODIFICATION OR WAIVER HEREUNDER WHETHER OR
NOT NOTEHOLDER ITSELF ACTUALLY CONSENTS THERETO.
********************
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IN WITNESS WHEREOF, I the undersigned Noteholder, or a person duly authorized to
act for me in the premises, has executed this Conversion Agreement by signature
on the following Signature Page and initialed this and every preceding page
hereof on the date first above written, in the City and State shown under
Section 12 of this Conversion Agreement above.
*** Signature Page ***
INDIVIDUAL NOTEHOLDERS ONLY:
(Not Corporations, Partnerships, Trusts or other entities)
SIGNATURE _____________________________________________
Print Name of Noteholder _____________________________________________
Residence Address _________________________________________________________
___________________________________________________________________________
Fax No( )-
____________________________________________________________________
Home Telephone No. ( ) -
Work Telephone No.( _________________________________ )
Social Security Number ___________________________________________
(First listed person's number, if more than person is completing)
COMPANY OR OTHER ENTITY NOTEHOLDERS ONLY:
Print Name of Noteholder (Company/Entity Name) _____________________
AUTH. PERSON'S SIGNATURE ________________________________
Authorized Person's Name & Title (Print) _____________________________
Address of Principal Office ____________________________________________
Organized under laws of State or Country ____________________________
Telephone ( ) - Fax No. ( ) -
Federal Tax I.D. Number ________________________________
**************************************************
NOTEHOLDER: DO NOT WRITE BELOW THIS LINE
Accepted: __________ X _________________________
SIGNATURE
Rejected: _______ Name: ________________________
DATED, _________________ 2002__ Title: ___________________________
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