THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED...
Exhibit
10.1
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE COMMON STOCK 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 THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED
Principal
Amount: $250,000 Issue
Date: August 6, 2007
FOR
VALUE
RECEIVED, Accountabilities, Inc., a Delaware corporation (hereinafter called
"Borrower"), hereby promises to pay to the order of North Atlantic Resources
LTD
(the "Holder") with an address at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx
00000, without demand, the sum of Two Hundred Fifty Thousand Dollars ($250,000)
with simple interest accruing thereon, on the earlier of (i) February 16, 2008
or (ii) the date that is five (5) days after the Borrower has received gross
proceeds of $1,500,000 or more from a private placement of securities (the
"Maturity Date").
ARTICLE
I
GENERAL
PROVISIONS
1.1 Maturity. Principal
and accrued interest under this Note shall become due and payable on the
Maturity Date. Borrower may prepay this note upon not less than ten
(10) days prior written notice to the Holder; provided, however, that Holder
shall have the right to exercise the conversion rights set forth in Article
II
during such notice period.
1.2 Conversion
Privileges. The conversion rights set forth in Article II shall
remain in full force and effect immediately from the date hereof and until
the
Note is paid in full regardless of the occurrence of an Event of
Default. The Note shall be payable in full on the Maturity Date,
unless previously converted into Common Stock in accordance with Article II
hereof.
1.3 Interest
Rate. Simple interest payable on this Note shall accrue at the
annual rate of ten percent (10%) and be payable at the request of the Holder
upon or after each conversion of principal pursuant to Article II, 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.
1
ARTICLE
II
CONVERSION
RIGHTS
The
Holder shall have the right to convert the principal due under this Note into
Shares of the Borrower's Common Stock (“Common Stock”) as set forth
below.
2.1. Conversion
into the Borrower's Common Stock.
(a) The
Holder shall have the right from and after the issuance of this Note and then
at
any time until this Note is fully paid, to convert any outstanding and unpaid
principal portion of this Note, at the election of the Holder (the date of
giving of such notice of conversion being a "Conversion Date") into fully paid
and nonassessable shares of Common Stock, or any shares of capital stock of
Borrower into which such Common Stock shall hereafter be changed or
reclassified, 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 completed Notice of Conversion, a form of which is annexed
hereto, Borrower shall issue and deliver to the Holder within three (3) business
days after the Conversion Date (such third day being the “Delivery Date”) that
number of shares of Common Stock for the portion of the Note converted in
accordance with the foregoing. 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 by the Conversion
Price.
(b) Subject
to adjustment as provided in Section 2.1(e) hereof, the Conversion Price per
share shall be equal to the greater of (i) 75% of the per share Market Price
(as
defined below) of the Common Stock on the trading day immediately preceding
the
applicable Conversion Date or (ii) the Per Share Enterprise Value (as defined
below) as of the last day of the fiscal quarter which has been completed more
than forty-five (45) days before the Conversion Date.
(c) For
purposes of this Note, the term “Market Price” of the Common Stock means
the average of the closing prices of such security’s sales on the principal
securities exchanges on which such security may at the time be listed, or,
if
there has been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted by the Nasdaq Stock Market as of
4:00
P.M., New York time, or, if on any day such security is not quoted by the Nasdaq
Stock Market, the average of the highest bid and lowest asked prices on such
day
in the domestic over-the-counter market as reported by the NASD OTC Bulletin
Board, or any similar successor organization, or in the pink sheets, in each
such case averaged over a period of five days consisting of the day prior to
the
day as of which Market Price is being determined and the four consecutive
business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted by the Nasdaq Stock Market or the
over-the-counter market, the Market Price shall be the fair value thereof
determined in good faith by the Corporation’s Board of Directors.
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(d) For
purposes of this Note, the term “Per Share Enterprise Value” means the
amount determined by dividing (A) the sum of (i) the aggregate Market Price
of
all of the Borrower’s Common Stock outstanding immediately prior to the
Conversion Date and (ii) the Company’s aggregate outstanding indebtedness
immediately prior to the Conversion Date (the sum of (i) and (ii) to be referred
to herein as the “Enterprise Value”), by the total number of shares of Common
Stock outstanding immediately prior to the Conversion Date ; provided, however,
that in no event shall the Enterprise Value be less than
$18,000,000.
(e) The
Conversion Price and number and kind of shares or other securities to be issued
upon conversion determined pursuant to Section 2.1(a), 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, shall
thereafter be deemed to evidence the right to acquire upon conversion 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
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 that may be issued or outstanding, this
Note,
as to the unpaid principal portion thereof, shall thereafter be deemed to
evidence the right to acquire upon conversion 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.
(f) Whenever
the Conversion Price and/or the number or kind of shares or other securities
to
be issued upon conversion are adjusted pursuant to Section 2.1(e) above, the
Borrower shall promptly mail to the Holder a notice describing such adjustment
and setting forth a statement of the facts requiring such
adjustment.
(g) Borrower
will reserve from its authorized and unissued Common Stock the number of shares
of Common Stock as shall be sufficient to convert the full amount of this
Note. Borrower represents that upon issuance, such shares will be
duly and validly issued, fully paid and non-assessable. Xxxxxxxx
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.
3
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. 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, upon demand, without presentment, 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, interest or other sum due under this Note when due
and
such failure continues for a period of ten (10) business days after the due
date.
3.2 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 without the consent of the
Borrower is not dismissed within sixty (60) days of appointment.
3.3 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings
or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower and if instituted against Borrower are not dismissed within
forty-five (45) days of initiation.
3.4 Failure
to Deliver Common Stock or Replacement Note. Xxxxxxxx's failure
to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note, or, if required, a replacement Note for ten business
days
beyond the required delivery date or any stated cure period, whichever is
later.
ARTICLE
IV
SUBORDINATION
4.1 Subordinate
Right of Payment. Xxxxxxxx hereby agrees, and the
Holder of this Note by its acceptance hereof agrees, that the payment of the
principal of and interest on this Note is hereby expressly made subordinate
in
right of payment, to the extent set forth in the following paragraphs (a) and
(b), to the prior payment in full of the “Senior Debt” of
Borrower. “Senior Debt” means all bank debt and indebtedness now or
hereafter outstanding under any
4
factoring
agreements or accounts receivable sale agreement existing on the date of this
Note, and any renewals or replacements thereof.
(a) In
the event of insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to Borrower or
to
any of the property of Borrower, or in the event of any proceedings for
voluntary liquidation, dissolution, or other winding-up of Borrower, whether
or
not involving insolvency or bankruptcy, then the holders of the Senior Debt
shall be entitled to receive payment in full of all principal of, and premium,
if any, and interest on the Senior Debt before the Holder of this Note shall
be
entitled to receive any payment on account of principal or interest on this
Note, and to that end the holders of the Senior Debt shall be entitled to
receive for application in payment thereof any payment or distribution of any
kind or character, whether in cash or property or securities, which may be
payable or deliverable in any such proceedings in respect of this
Note.
(b) In
the event that the Holder of this
Note shall have received written notice that the Senior Debt has been declared
due and payable prior to its stated maturity, by reason of the occurrence of
an
event of default thereunder (under circumstances in which the provisions of
the
foregoing paragraph (a) are not applicable), then all principal of and premium,
if any, and interest on the Senior Debt outstanding at the time of such
declaration shall first be paid in full, before any payment on account of
principal or interest is made upon this Note.
4.2 Borrower
Obligation Unconditional and Absolute. The provisions of this
Article IV are for the purpose of defining the relative rights of the holders
of
the Senior Debt on the one hand and the Holder of this Note on the other hand,
against Borrower and its property; and nothing herein shall impair, as between
Borrower and the Holder, the obligation of Borrower, which is unconditional
and
absolute, to pay to the Holder hereof the principal hereof and interest hereon
in accordance with the terms and the provisions hereof; nor shall anything
herein prevent the holder of this Note from exercising all remedies otherwise
permitted by applicable law or hereunder upon default under this Note, subject
to the rights, if any, under this Article 4 of the holders of the Senior Debt
to
receive cash, property, stock or obligations otherwise payable or deliverable
to
the Holder of this Note.
ARTICLE
V
MISCELLANEOUS
5.1 Failure
or Indulgence Not Waiver. No failure or delay on the part of
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.
5.2 Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice
is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice
is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be: (i) if to the Borrower to:
Accountabilities, Inc., 000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxxxx
00000,facsimilie: (000) 000-0000, Attention: Xxxxxxx XxxXxxxxxx; (ii) if to
the
Holder, to the name and address set forth on the front page of this Note,
facsimilie: (000) 000-0000.
5.3 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.
5.4 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.
5.5 Cost
of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.
5.6 Governing
Law. This Note shall be governed by and construed in accordance
with the laws of the State of New Jersey. Any action brought by
either party against the other concerning the transactions contemplated by
this
Agreement shall be brought only in the civil or state courts of New Jersey
or in
the federal courts located in New Jersey. Both parties and the
individual signing this Agreement 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.
5.7 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.
5.8 Shareholder
Status. The Holder shall not have rights as a shareholder of the
Borrower with respect to unconverted portions of this Note. However,
the Holder will have all the rights of a shareholder of the Borrower with
respect to the shares of Common Stock to be received by Holder after delivery
by
the Holder of a Conversion Notice to the Borrower.
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IN
WITNESS WHEREOF, Xxxxxxxx has caused this Note to be signed in its name by
an
authorized officer as of the 6th day of August, 2007.
| ACCOUNTABILITIES, INC. | |||
|
Date:
|
By:
|
/s/ Xxxxxxx XxxXxxxxxx | |
| Name: Xxxxxxx XxxXxxxxxx | |||
| Title: Chief Financial Officer | |||
WITNESS:
6
NOTICE
OF CONVERSION
(To
be
executed by the Registered 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 _______________on August __, 2007
into
Shares of Common Stock of Accountabilities, Inc. (the "Borrower")
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
7
