FORM OF NOTE
EXHIBIT
10.8
FORM
OF NOTE
THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER
OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE AND THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF,
UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.
KACHING
KACHING, INC.
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No.:
KK-10-_______________
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$_____________
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|
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Dated:
April ___, 2010
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FOR VALUE
RECEIVED, KaChing KaChing,
Inc., a Delaware corporation (the
“Maker”), hereby promises to pay to
the order of _______________________
(together with
its successors, representatives, and
permitted assigns, the “Holder”), in
accordance with the
terms hereinafter provided, the principal
amount
of ________________________ ($______________), together with
interest thereon. Concurrently with
the issuance of this Note, the Maker
is issuing separate convertible promissory notes (the “Other Notes”) to
separate purchasers (the “Other Holders”)
pursuant to the Purchase Agreement (as defined in Section 1.01
hereof).
All payments under
or pursuant to this Note shall be made in
United States
Dollars in immediately available funds
to the Holder at the address of the Holder first set forth
above or at such other place as the Holder may designate from time to
time in writing to the Maker or by wire transfer of funds
to the Holder’s account, instructions for which are attached hereto as Exhibit A. The
outstanding principal balance of this Note shall be due and payable on October
[__], 2011 (the “Maturity Date”) or at
such earlier time as provided herein.
ARTICLE
I.
Section
1.01 Purchase Agreement.
This Note has been executed and delivered pursuant to the Securities Purchase
Agreement dated as of April [__], 2010 (the “Purchase Agreement”)
by and among the Maker and the purchasers listed therein. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth for such
terms in the Purchase Agreement.
1
Section
1.02 Interest.
(a) Beginning
on the issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to ten percent (10%), payable quarterly on
January 1, April 1, July 1 and October 1, beginning on July 1,
2010 in (A) cash or (B) shares of the Maker’s common stock, $.001 par
value per share (the “Common Stock”). The
Maker shall provide irrevocable written notice to the Holder of the form of
interest payment at least ten (10) days prior to an interest payment date. If no
such notice is provided at least ten (10) days prior to an interest payment
date, the Maker must make the interest payment in cash. The number of shares of
Common Stock to be issued as payment of accrued and unpaid interest shall be
determined by dividing (a) the total amount of accrued and unpaid interest to be
paid in Common Stock by (b) the lesser of (i) the Conversion Price (as defined
in Section 3.02 hereof) and (ii) 90% of the average of the Closing Bid Price (as
defined in Section 1.02(b) below) for the ten (10) Trading Days immediately
preceding the interest payment date. Interest shall be computed on the basis of
a 360-day year of twelve (12) 30-day months and shall accrue commencing on the
Issuance Date. Furthermore, upon the occurrence of an Event of Default (as
defined in Section 2.01 hereof), then to the extent permitted by law, the Maker
will pay interest to the Holder, payable on demand, on the outstanding principal
balance of the Note from the date of the Event of Default until such Event of
Default is cured at the annual rate of the lesser of twenty-four percent (24%)
and the maximum applicable legal rate per annum.
(b) The term
“Closing Bid
Price” shall mean, on any particular date (i) the last closing bid price
per share of the Common Stock on such date on any registered national stock
exchange on which the Common Stock is then listed, or if there is no such price
on such date, then the last closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (ii) if the Common Stock is
not listed then on a registered national stock exchange, the last trading price
for a share of Common Stock in the over-the-counter market, as reported by the
OTC Bulletin Board or in the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (iii) if the Common Stock is not then
reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices), then the average of the “Pink Sheet” quotes on such date, as determined
in good faith by the Holder, or (iv) if the Common Stock is not then publicly
traded, the fair market value of a share of Common Stock as determined by the
Holder and reasonably acceptable to the Maker.
Section
1.03 Payment on Non-Business
Days. Whenever any payment to be made shall be due on a Saturday, Sunday
or a public holiday under the laws of the State of New York, such payment may be
due on the next succeeding business day and such next succeeding day shall be
included in the calculation of the amount of accrued interest payable on such
date.
Section
1.04 Transfer. This Note
may be transferred or sold, subject to the provisions of Section 4.08 of this
Note, or pledged, hypothecated or otherwise granted as security by the
Holder.
Section
1.05 Replacement. Upon
receipt of a duly executed, notarized and unsecured written statement from the
Holder with respect to the loss, theft or destruction of this Note (or any
replacement hereof) and a standard indemnity, or, in the case of a mutilation of
this Note, upon surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or
mutilated Note.
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ARTICLE
II.
EVENTS
OF DEFAULT; REMEDIES
Section
2.01 Events of Default.
The occurrence of any of the following events shall be an “Event of Default”
under this Note:
(a) the Maker
shall fail to make any principal or interest payments on the date such payments
are due and such default is not fully cured within three (3) business days after
the occurrence thereof; or
(b) the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the NYSE Amex Equities, the Nasdaq Capital Market, the Nasdaq Global
Market, the Nasdaq Global Select Market or The New York Stock Exchange, Inc. for
a period of seven (7) consecutive Trading Days; or
(c) the
Maker’s notice to the Holder, including by way of public announcement, at any
time, of its inability to comply (for any reason or no reason) or its intention
not to comply with proper requests for conversion of this Note into shares of
Common Stock; or
(d) the Maker
shall fail to (i) timely deliver the shares of Common Stock upon conversion of
the Note or any interest accrued and unpaid or (ii) make the payment of any fees
and/or liquidated damages under this Note, the Purchase Agreement or the
Warrants, which failure is not remedied within four (4) business days after the
incurrence thereof; or
(e) default
shall be made in the performance or observance of (i) any covenant, condition or
agreement contained in this Note and such default is not fully cured within five
(5) business days after the Holder delivers written notice to the Maker of the
occurrence thereof or (ii) any covenant, condition or agreement contained in the
Purchase Agreement, the Other Notes, the Warrants or any other Transaction
Document which is not covered by any other provisions of this Section 2.01 and
such default is not fully cured within five (5) business days after the Holder
delivers written notice to the Maker of the occurrence thereof; or
(f) any
representation or warranty made by the Maker herein or in the Purchase
Agreement, the Other Notes, the Warrants or any other Transaction Document shall
prove to have been false or incorrect or breached in any respect on the date as
of which made and the Holder delivers written notice to the Maker of the
occurrence thereof; or
(g) the Maker
shall (A) default in any payment of any amount or amounts of principal of or
interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness is in excess of $50,000 or (B)
default in the observance or performance of any other agreement or condition
relating to any Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders or beneficiary or beneficiaries of
such Indebtedness to cause with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
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(h) the
failure of the Maker to instruct its transfer agent to remove any legends from
shares of Common Stock eligible to be sold under Rule 144 of the Securities Act
and issue such unlegended certificates to the Holder within three (3) Trading
Days of the Holder’s request so long as the Holder has provided reasonable
assurances to the Maker that such shares of Common Stock can be sold pursuant to
Rule 144; or
(i) the
breach by the Maker of the terms of any subordination agreement to which it is a
party relating to the subordination of any Indebtedness to this Note;
or
(j) one or
more judgments, non-interlocutory orders or decrees shall be entered by a U.S.
state or federal or a foreign court or administrative agency of competent
jurisdiction against the Maker and/or any of its Subsidiaries involving, in the
aggregate, a liability as to any single or related series of transactions,
incidents or conditions, of $50,000 or more, and the same shall remain
unsatisfied, unvacated, unbonded or unstayed pending appeal for a period of 30
days after the entry thereof; or
(k) any Lien
created by any of the Security Documents shall at any time fail to constitute a
valid first priority perfected Lien on all of the Collateral (as defined in the
Security Agreement) and the Pledged Collateral (as defined in each of the
Shareholder Guaranties) purported to be secured thereby, or any party thereto
shall so assert; or
(l) the Maker
fails to file, or is determined to have failed to file, in a timely manner any
Periodic Report or Current Report (other than a Current Report that is required
solely pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a) or 5.02(e)
of Form 8-K as in effect on the Issuance Date) required to be filed with the SEC
pursuant to the Securities Exchange Act of 1934, as amended; or
(m) any bank
at which any deposit account, blocked account, or lockbox account of the Maker
or any Subsidiary is maintained shall fail to comply with any material term of
any deposit account, blocked account, lockbox account or similar agreement to
which such bank is a party or any securities intermediary, commodity
intermediary or other financial institution at any time in custody, control or
possession of any investment property of the Maker or any Subsidiary shall fail
to comply with any of the terms of any investment property control agreement to
which such Person is a party (it being understood that only accounts pursuant to
which the Collateral Agent has requested account control agreements should be
subject to this clause (m)); or
(n) any
material damage to, or loss, theft or destruction of, any Collateral, whether or
not insured, or any strike, lockout, labor dispute, embargo, condemnation, act
of God or public enemy, or other casualty which causes, for more than fifteen
(15) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Maker or any Subsidiary, if any such
event or circumstance could reasonably be expected to have a Material Adverse
Effect; or
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(o) the
failure of the Maker to pay any amounts due to the Holder herein or any other
Transaction Document within five (5) business days of the date such payments are
due and such default is not fully cured within two (2) business days after the
Holder delivers written notice to the Maker of the occurrence thereof;
or
(p) the
occurrence of an Event of Default under the Other Notes; or
(q) the Maker
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) issue a notice of bankruptcy or winding down of its operations or issue a
press release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing;
or
(r) a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets in connection with the liquidation or dissolution of the Maker or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to the Maker; or
(s) Xxxxxx X.
XxXxxxx shall cease to be the President or Chief Executive Officer of the Maker
or otherwise become disabled or unable to perform his duties as the Maker’s
principal executive officer for any period of time; or
(t) the Maker
shall fail to prepay 100% of the outstanding principal amount of the Notes and
all accrued and unpaid interest thereon on a Prepayment Date, as provided in
Section 3.06 hereof; or
(u) any
representation or warranty made by any Shareholder Guarantor in either a
Shareholder Guaranty or Shareholder Pledge Agreement shall prove to have been
false or incorrect or breached in any respect on the date as of which made and
the Holder delivers written notice to the Maker of the occurrence thereof;
or
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(v) any
Shareholder Guarantor shall (A) default or be in default in any payment of any
amount or amounts of principal of or interest on any Indebtedness that is
secured by a Lien on any Pledged Collateral (“Secured
Indebtedness”) (notwithstanding the prohibition against incurring or
permitting any Liens on Pledged Collateral contained within the Shareholder
Guaranties) or (B) default in the observance or performance of any other
agreement or condition relating to any Secured Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders or beneficiary or
beneficiaries of such Secured Indebtedness to cause with the giving of notice if
required, such Secured Indebtedness to become due prior to its stated
maturity.
Section
2.02 Remedies Upon An Event of
Default. If an Event of Default shall have occurred and shall be
continuing, the Holder of this Note may at any time at its option, (a) declare
the entire unpaid principal balance of this Note, together with all interest
accrued hereon, due and payable, and thereupon, the same shall be accelerated
and so due and payable, without presentment, demand, protest, or notice, all of
which are hereby expressly unconditionally and irrevocably waived by the Maker;
provided, however, that upon
the occurrence of an Event of Default described in Sections 2.01(q) or (r), the
outstanding principal balance and accrued interest hereunder shall be
automatically due and payable, (b) demand that the principal amount of this Note
then outstanding and all accrued and unpaid interest thereon shall be converted
into shares of Common Stock at a Conversion Price per share calculated pursuant
to Section 3.01 hereof assuming that the date that the Event of Default occurs
is the Conversion Date (as defined in Section 3.01 hereof), or (c) exercise or
otherwise enforce any one or more of the Holder’s rights, powers, privileges,
remedies and interests under this Note, the Purchase Agreement, the Security
Documents or applicable law. No course of delay on the part of the Holder shall
operate as a waiver thereof or otherwise prejudice the right of the Holder. No
remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute or
otherwise.
ARTICLE
III.
CONVERSION;
ANTIDILUTION; PREPAYMENT
Section
3.01 Conversion Option. At
any time on or after the Issuance Date, this Note shall be convertible (in whole
or in part), at the option of the Holder (the “Conversion Option”),
into such number of fully paid and non-assessable shares of Common Stock (the
“Conversion
Rate”) as is determined by dividing (x) that portion of the outstanding
principal balance plus any accrued but unpaid interest under this Note as of
such date that the Holder elects to convert by (y) the Conversion Price (as
defined in Section 3.02 hereof) then in effect on the date on which the Holder
faxes a notice of conversion (the “Conversion Notice”),
duly executed, to the Maker (facsimile number (000) 000-0000, Attn.: Chief
Executive Officer) (the “Conversion Date”);
provided, however, that the
Conversion Price shall be subject to adjustment as described in Section 3.05
below. The Holder shall deliver this Note to the Maker at the address designated
in the Purchase Agreement at such time that this Note is fully converted. With
respect to partial conversions of this Note, the Maker shall keep written
records of the amount of this Note converted as of each Conversion
Date.
6
Section
3.02 Conversion Price. The
term “Conversion
Price” shall mean $0.30, subject to adjustment under Section 3.05
hereof.
Section
3.03 Mechanics of
Conversion.
(a) Not later
than three (3) Trading Days after any Conversion Date (the “Delivery Date”), the
Maker or its designated transfer agent, as applicable, shall issue and deliver
to the Holder or, at the request of the Holder (provided that a registration
statement under the Securities Act providing for the resale of the Common Stock
to which the Holder shall be entitled is then in effect or such shares may be
sold without the requirement to be in compliance with Rule 144(c)(1) of the
Securities Act and otherwise without restriction or limitation pursuant to Rule
144 of the Securities Act), to the Depository Trust Company (“DTC”) account on the
Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as specified
in the Conversion Notice, registered in the name of the Holder or its designee,
for the number of shares of Common Stock to which the Holder shall be entitled.
Notwithstanding the foregoing to the contrary, the Maker or its transfer agent
shall only be obligated to issue and deliver the shares to DTC on a Holder’s
behalf via DWAC if (i) such shares may be issued without restrictive legends and
(ii) the Maker and the transfer agent are participating in DTC through the DWAC
system. If all of the conditions set forth in clauses (i) and (ii) above are not
satisfied, the Maker or its designated transfer agent, as the case may be, shall
deliver physical certificates representing the number of shares of Common Stock
being acquired upon the conversion of this Note. If in the case of any
Conversion Notice, any shares of Common Stock to which a Holder is entitled to
receive thereunder are not delivered to or as directed by the applicable Holder
by the Delivery Date, the Holder shall be entitled by written notice to the
Maker at any time on or before its receipt of such shares of Common Stock
thereafter, to rescind such conversion, in which event the Maker shall
immediately return this Note tendered for conversion, whereupon the Maker and
the Holder shall each be restored to their respective positions immediately
prior to the delivery of such notice of revocation, except that any amounts
described in Sections 3.03(b) and (c) shall be payable through the date notice
of rescission is given to the Maker.
(b) The Maker
understands that a delay in the delivery of the shares of Common Stock upon
conversion of this Note beyond the Delivery Date could result in economic loss
to the Holder. If the Maker fails to deliver to the Holder such shares via DWAC
or a certificate or certificates pursuant to this Section hereunder by the
Delivery Date, the Maker shall pay to such Holder, in cash, an amount per
Trading Day for each Trading Day until such shares are delivered via DWAC or
certificates are delivered, together with interest on such amount at a rate of
10% per annum, accruing until such amount and any accrued interest thereon is
paid in full, equal to the greater of (A) (i) 1% of the aggregate principal
amount of the Notes requested to be converted for the first five (5) Trading
Days after the Delivery Date and (ii) 2% of the aggregate principal amount of
the Notes requested to be converted for each Trading Day thereafter and (B)
$2,000 per day (which amount shall be paid as liquidated damages and not as a
penalty). Nothing herein shall limit a Holder’s right to pursue actual damages
for the Maker’s failure to deliver any shares of Common Stock upon conversion
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).
Notwithstanding anything to the contrary contained herein, the Holder shall be
entitled to withdraw a Conversion Notice, and upon such withdrawal the Maker
shall only be obligated to pay the liquidated damages accrued in accordance with
this Section 3.03(b) through the date the Conversion Notice is
withdrawn.
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(c) In
addition to any other rights available to the Holder, if the Maker fails to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the shares of Common Stock issuable upon conversion of this Note on
or before the Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the shares of
Common Stock issuable upon conversion of this Note which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the
Maker shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Common Stock issuable upon conversion of this Note that the
Maker was required to deliver to the Holder in connection with the conversion at
issue times (B) the price at which the sell order giving rise to such purchase
obligation was executed, and (2) at the option of the Holder, either reinstate
the portion of the Note and equivalent number of shares of Common Stock for
which such conversion was not honored or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Maker timely complied
with its conversion and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover
a Buy-In with respect to an attempted conversion of shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (1) of the immediately preceding sentence the Maker shall be
required to pay the Holder $1,000. The Holder shall provide the Maker written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Maker. Nothing herein shall limit a Xxxxxx’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Maker’s failure to timely deliver certificates representing
shares of Common Stock upon conversion of this Note as required pursuant to the
terms hereof.
Section
3.04 Ownership Cap and Certain
Conversion Restrictions. Notwithstanding anything to the contrary set
forth in Article III of this Note, at no time may the Holder convert this Note
if the number of shares of Common Stock to be issued pursuant to such conversion
would cause the Holder to be directly or indirectly the beneficial owner (as
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules thereunder) of more than 4.99% of the Common
Stock; provided, however, that upon
the Holder providing the Maker with sixty-one (61) days notice (pursuant to
Section 4.01 hereof) (the “Waiver Notice”) that
the Holder would like to waive this Section 3.04 with regard to any or all
shares of Common Stock issuable upon conversion of this Note, this Section 3.04
will be of no force or effect with regard to all or a portion of the Note
referenced in the Waiver Notice. For purposes of this section, the number of
shares of Common Stock owned by the Holder shall include the number of shares of
Common Stock issuable upon exercise of this Note but shall exclude the number of
shares of Common Stock which are issuable upon the exercise or conversion of the
unexercised or unconverted portion of any other securities of the Maker subject
to a limitation on exercise or conversion analogous to the limitation contained
herein owned by the Holder.
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Section
3.05 Adjustment of Conversion
Price.
(a) The
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) Adjustments for Stock Splits
and Combinations. If the Maker shall at any time or from time to time
after the Issuance Date, effect a stock split of the outstanding Common Stock,
the applicable Conversion Price in effect immediately prior to the stock split
shall be proportionately decreased. If the Maker shall at any time or from time
to time after the Issuance Date, combine the outstanding shares of Common Stock,
the applicable Conversion Price in effect immediately prior to the combination
shall be proportionately increased. Any adjustments under this Section
3.05(a)(i) shall be effective at the close of business on the date the stock
split or combination occurs.
(ii) Adjustments for Certain
Dividends and Distributions. If the Maker shall at any time or from time
to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, and in each event, the
applicable Conversion Price in effect immediately prior to such event shall be
decreased as of the time of such issuance or, in the event such record date
shall have been fixed, as of the close of business on such record date, by
multiplying, the applicable Conversion Price then in effect by a
fraction: (1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date; and (2) the denominator
of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.
(iii) Adjustment for Other
Dividends and Distributions. If the Maker shall at any time or from time
to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in other than shares of Common Stock, then, and in each
event, an appropriate revision to the applicable Conversion Price shall be made
and provision shall be made (by adjustments of the Conversion Price or
otherwise) so that the holder of this Note shall receive upon conversions
thereof, in addition to the number of shares of Common Stock receivable thereon,
the number of securities of the Maker that such holder would have received had
this Note been converted into Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities (together with any distributions
payable thereon during such period), giving application to all adjustments
called for during such period under this Section 3.05(a)(iii) with respect to
the rights of the holders of this Note and the Other Notes; provided, however, that if such
record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price
shall be adjusted pursuant to this paragraph as of the time of actual payment of
such dividends or distributions.
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(iv) Adjustments for
Reclassification, Exchange or Substitution. If the Common Stock issuable
upon conversion of this Note at any time or from time to time after the Issuance
Date shall be changed to the same or different number of shares of any class or
classes of stock, whether by reclassification, exchange, substitution or
otherwise (other than by way of a stock split or combination of shares or stock
dividends provided for in Sections 3.05(a)(i), (ii) and (iii), or a
reorganization, merger, consolidation, or sale of assets provided for in Section
3.05(a)(v)), then, and in each event, an appropriate revision to the Conversion
Price shall be made and provisions shall be made (by adjustments of the
Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of shares of Common Stock into which such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment as
provided herein.
(v) Adjustments for
Reorganization, Merger, Consolidation or Sales of Assets. If at any time
or from time to time after the Issuance Date there shall be a capital
reorganization of the Maker (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section
3.05(a)(i), (ii) and (iii), or a reclassification, exchange or substitution of
shares provided for in Section 3.05(a)(iv)), or a merger or consolidation of the
Maker with or into another corporation where the holders of outstanding voting
securities of the Maker prior to such merger or consolidation do not own over
fifty percent (50%) of the outstanding voting securities of the merged or
consolidated entity, immediately after such merger or consolidation, or the sale
of all or substantially all of the Maker’s properties or assets to any other
person (an “Organic
Change”), then as a part of such Organic Change, (A) if the surviving
entity in any such Organic Change is a public company that is registered
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
its common stock is listed or quoted on a national exchange or the OTC Bulletin
Board, an appropriate revision to the Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the Holder shall have the right thereafter to convert such Note into the
kind and amount of shares of stock and other securities or property of the Maker
or any successor corporation resulting from Organic Change, and (B) if the
surviving entity in any such Organic Change is not a public company that is
registered pursuant to the Exchange Act, or its common stock is not listed or
quoted on a national exchange or the OTC Bulletin Board, the Holder shall have
the right to demand that the unpaid principal of this Note and any accrued
interest thereon be immediately prepaid by the Maker. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3.05(a)(v) with respect to the rights of the Holder after the
Organic Change to the end that the provisions of this Section 3.05(a)(v)
(including any adjustment in the applicable Conversion Price then in effect and
the number of shares of stock or other securities deliverable upon conversion of
this Note and the Other Notes) shall be applied after that event in as nearly an
equivalent manner as may be practicable.
(vi) Adjustments for Issuance of
Additional Shares of Common Stock. In the event the Maker shall at any
time following the Issuance Date issue or sell any share of Common Stock
(otherwise than as provided in the foregoing subsections (i) through (v) of this
Section 3.05(a) or pursuant to Common Stock Equivalents (hereafter defined)
granted or issued prior to the Issuance Date) (an “Additional Share of Common
Stock”) at a price per share less than the Conversion Price then in
effect, or without consideration (in which case such Additional Shares of Common
Stock shall be deemed to have been issued at a price per share of $.001), the
Conversion Price then in effect upon each such issuance shall be decreased to
the price equal to the consideration per share paid for such Additional Share of
Common Stock.
10
(vii) Issuance of or Modification
of Common Stock Equivalents. In the event the Maker shall, at any time
following the Issuance Date: (i) issue or sell any securities convertible into
or exchangeable for, directly or indirectly, Common Stock (“Convertible
Securities”), or any rights or warrants or options to purchase any such
Common Stock or Convertible Securities (collectively, the “Common Stock
Equivalents”) with an exercise or conversion price less than the
Conversion Price then in effect, or (ii) modify the conversion or exercise price
of any Common Stock Equivalent issued prior to, on or after the Issuance Date,
to an exercise or conversion price less than the Conversion Price then in
effect, the Conversion Price then in effect shall be decreased to the exercise
or conversion price of such Common Stock Equivalent.
(b) Record Date. In case
the Maker shall take record of the holders of its Common Stock for the purpose
of entitling them to subscribe for or purchase Common Stock or Convertible
Securities, then the date of the issue or sale of the shares of Common Stock
shall be deemed to be such record date.
(c) Certain Issues
Excepted. Anything herein to the contrary notwithstanding, the Maker
shall not be required to make any adjustment to the Conversion Price pursuant to
Sections 3.05(a)(vi) or (vii) hereof upon (i) securities issued (other than for
cash) in connection with a merger, acquisition, or consolidation, (ii)
securities issued pursuant to the exercise or conversion of Common Stock
Equivalents issued prior to the Issuance Date (but such exception shall not
affect the obligation to decrease the Conversion Price if required by Section
3.05(a)(vii) hereof), (iii) securities issued in connection with bona fide
strategic license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital and (iv) Common Stock
issued or options to purchase Common Stock granted, in each case, pursuant to
the Maker’s stock option plans and employee stock purchase plans outstanding as
they exist on the date of the Purchase Agreement.
(d) No Impairment. The
Maker shall not, by amendment of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Maker, but will at all times in good faith, assist in the
carrying out of all the provisions of this Section 3.05 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the Holder hereunder against impairment. In the event a
Holder shall elect to convert any Notes as provided herein, the Maker cannot
refuse conversion based on any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, violation
of an agreement to which such Holder is a party or for any reason whatsoever,
unless, an injunction from a court, or notice, restraining and or adjoining
conversion of all or of said Notes shall have issued and the Maker posts a
surety bond for the benefit of such Holder in an amount equal to one hundred
thirty percent (130%) of the amount of the Notes the Holder has elected to
convert, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder (as liquidated damages) in the event it obtains
judgment.
11
(e) Certificates as to
Adjustments. Upon occurrence of each adjustment or readjustment of the
Conversion Price or number of shares of Common Stock issuable upon conversion of
this Note pursuant to this Section 3.05, the Maker at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to the Holder a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based. The Maker shall, upon written request of the Holder, at
any time, furnish or cause to be furnished to the Holder a like certificate
setting forth such adjustments and readjustments, the applicable Conversion
Price in effect at the time, and the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon the conversion of this Note. Notwithstanding the foregoing, the
Maker shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent (1%) of such
adjusted amount.
(f) Issue Taxes. The
Maker shall pay any and all issue and other taxes, excluding federal, state or
local income taxes, that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of this Note pursuant thereto; provided, however, that the
Maker shall not be obligated to pay any transfer taxes resulting from any
transfer requested by the Holder in connection with any such
conversion.
(g) Fractional Shares. No
fractional shares of Common Stock shall be issued upon conversion of this Note.
In lieu of any fractional shares to which the Holder would otherwise be
entitled, the Maker shall pay cash equal to the product of such fraction
multiplied by the average of the Closing Bid Prices of the Common Stock for the
five (5) consecutive Trading Days immediately preceding the Conversion
Date.
(h) Reservation of Common
Stock. The Maker shall at all times when this Note shall be outstanding,
reserve and keep available out of its authorized but unissued Common Stock, such
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of this Note and all interest accrued thereon; provided
that the number of shares of Common Stock so reserved shall at no time be less
than one hundred twenty percent (120%) of the number of shares of Common Stock
for which this Note and all interest accrued thereon is at any time convertible.
The Maker shall, from time to time in accordance with Delaware law, increase the
authorized number of shares of Common Stock if at any time the unissued number
of authorized shares shall not be sufficient to satisfy the Maker’s obligations
under this Section 3.05(h).
(i) Regulatory
Compliance. If any shares of Common Stock to be reserved for the purpose
of conversion of this Note or any interest accrued thereon require registration
or listing with or approval of any governmental authority, stock exchange or
other regulatory body under any federal or state law or regulation or otherwise
before such shares may be validly issued or delivered upon conversion, the Maker
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.
12
Section
3.06 Prepayment. Subject
to the terms set forth herein, at any time, provided there is not an Event of
Default, the Maker shall have the right to prepay 100%, and not less than 100%,
of the outstanding principal amount of this Note and all accrued and unpaid
interest thereon prior to the Maturity Date. The Maker may exercise its
prepayment right under this Section 3.06 by delivering a written notice thereof
by confirmed facsimile and overnight courier to all, but not less than all, of
the holders of the Notes (the “Prepayment Notice”
and the date such notice is delivered to all the holders is referred to as the
“Prepayment Notice
Date”) specifying the date of prepayment, which date shall be no earlier
than twenty (20) days, and no later than thirty (30) days, following the
Prepayment Notice Date (such specified date of prepayment being the “Prepayment Date”). A
Prepayment Notice shall be irrevocable. If the Maker elects to prepay this Note
pursuant to this Section 3.06, then it must simultaneously take the same action
with respect to the Other Notes. During the period between the Prepayment Notice
Date and the Prepayment Date, the Holder shall be entitled to all of its rights
under this Note, including, without limitation, its rights of conversion and
antiduliton set forth in this Article III. In the event that the Maker fails to
prepay, in full, the then outstanding principal amount of this Note and the
Other Notes and all accrued and unpaid interest thereon on the Prepayment Date,
the Maker shall subsequently be prohibited from prepaying any portion of the
principal amount of this Note without the prior written consent of the
Holder.
Section
3.07 No Rights as
Stockholder. Nothing contained in this Note shall be construed as
conferring upon the Holder, prior to the conversion of this Note, the right to
vote or to receive dividends or to consent or to receive notice as a stockholder
in respect of any meeting of stockholders for the election of directors of the
Maker or of any other matter, or any other rights as a stockholder of the
Maker.
ARTICLE
IV.
MISCELLANEOUS
Section
4.01 Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery,
telecopy or facsimile at the address or number designated in the Purchase
Agreement (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 Maker will give written notice to the Holder at least ten (10) days prior to
the date on which the Maker takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any pro rata
subscription offer to holders of Common Stock or (z) for determining rights to
vote with respect to any Organic Change, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Maker will also give written
notice to the Holder at least ten (10) days prior to the date on which any
Organic Change, dissolution, liquidation or winding-up will take place and in no
event shall such notice be provided to the Holder prior to such information
being made known to the public. The Maker shall promptly notify the Holder of
this Note of any notices sent or received, or any actions taken with respect to
the Other Notes.
13
Section
4.02 Governing Law. This
Note shall be governed by and construed in accordance with the internal laws of
the State of New York, without giving effect to any of the conflicts of law
principles which would result in the application of the substantive law of
another jurisdiction. This Note shall not be interpreted or construed with any
presumption against the party causing this Note to be drafted.
Section
4.03 Headings. Article and
section headings in this Note are included herein for purposes of convenience of
reference only and shall not constitute a part of this Note for any other
purpose.
Section
4.04 Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief. The remedies provided
in this Note shall be cumulative and in addition to all other remedies available
under this Note, at law or in equity (including, without limitation, a decree of
specific performance and/or other injunctive relief), no remedy contained herein
shall be deemed a waiver of compliance with the provisions giving rise to such
remedy and nothing herein shall limit a holder’s right to pursue actual damages
for any failure by the Maker to comply with the terms of this Note. Amounts set
forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the holder
thereof and shall not, except as expressly provided herein, be subject to any
other obligation of the Maker (or the performance thereof). The Maker
acknowledges that a breach by it of its obligations hereunder will cause
irreparable and material harm to the Holder and that the remedy at law for any
such breach may be inadequate. Therefore the Maker agrees that, in the event of
any such breach or threatened breach, the Holder shall be entitled, in addition
to all other available rights and remedies, at law or in equity, to seek and
obtain such equitable relief, including but not limited to an injunction
restraining any such breach or threatened breach, without the necessity of
showing economic loss and without any bond or other security being
required.
Section
4.05 Enforcement Expenses.
The Maker agrees to pay all costs and expenses of enforcement of this Note,
including, without limitation, reasonable attorneys’ fees and
expenses.
Section
4.06 Binding Effect. The
obligations of the Maker and the Holder set forth herein shall be binding upon
the successors and assigns of each such party, whether or not such successors or
assigns are permitted by the terms hereof.
Section
4.07 Amendments. This Note
may not be modified or amended in any manner except in writing executed by the
Maker and the Holder.
Section
4.08 Compliance with Securities
Laws. The Holder of this Note acknowledges that this Note is being
acquired solely for the Holder’s own account and not as a nominee for any other
party, and for investment, and that the Holder shall not offer, sell or
otherwise dispose of this Note. This Note and any Note issued in substitution or
replacement therefor shall be stamped or imprinted with a legend in
substantially the following form:
“THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF
COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER
THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF
HAVE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES
LAWS.”
14
Section
4.09 Consent to
Jurisdiction. Each of the Maker and the Holder (i) hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court
sitting in the Southern District of New York and the courts of the State of New
York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Note and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Maker and the Holder
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under the Purchase Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing in this Section
4.09 shall affect or limit any right to serve process in any other manner
permitted by law.
Section
4.10 Parties in Interest.
This Note shall be binding upon, inure to the benefit of and be enforceable by
the Maker, the Holder and their respective successors and permitted
assigns.
Section
4.11 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder 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.
Section
4.12 Excessive Interest.
Notwithstanding any other provision herein to the contrary, this Note is hereby
expressly limited so that the interest rate charged hereunder shall at no time
exceed the maximum rate permitted by applicable law. If, for any circumstance
whatsoever, the interest rate charged exceeds the maximum rate permitted by
applicable law, the interest rate shall be reduced to the maximum rate
permitted, and if the Holder shall have received an amount that would cause the
interest rate charged to be in excess of the maximum rate permitted, such amount
that would be excessive interest shall be applied to the reduction of the
principal amount owing hereunder (without charge for prepayment) and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal, such excess shall be refunded to the Maker.
Section
4.13 Maker Waivers. Except
as otherwise specifically provided herein, the Maker and all others that may
become liable for all or any part of the obligations evidenced by this Note,
hereby waive presentment, demand, notice of nonpayment, protest and all other
demands’ and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, and do hereby consent to any number of renewals of
extensions of the time or payment hereof and agree that any such renewals or
extensions may be made without notice to any such persons and without affecting
their liability herein and do further consent to the release of any person
liable hereon, all without affecting the liability of the other persons, firms
or Maker liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY
JURY.
15
(a) No delay
or omission on the part of the Holder in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Holder, nor shall any waiver by the Holder of any such
right or rights on any one occasion be deemed a waiver of the same right or
rights on any future occasion.
(b) THE MAKER
ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS
RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE
HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section
4.14 Definitions. For the
purposes hereof, the following terms shall have the following
meanings:
(a) “Person” means an
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
(b) “Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close..
[SIGNATURE
PAGE FOLLOWS]
16
IN
WITNESS WHEREOF, the Issuer has executed this Note as of the day and year first
above written.
| KACHING KACHING, INC. | |||
|
Date
|
By:
|
/s/ | |
| Name | |||
| Title | |||
17
FORM
OF
NOTICE OF
CONVERSION
(To be
Executed by the Registered Holder in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $
________________ of the principal amount and accrued but
unpaid interest of the above Note No. ___
into shares of Common Stock of KaChing
KaChing, Inc. (the “Maker”) according to the conditions
hereof, as of the date written below.
Date of
Conversion:
___________________________________________________________________
Applicable
Conversion Price:
____________________________________________________________
Number of
shares of Common Stock beneficially owned or deemed beneficially owned by
the
Holder on
the Date of
Conversion:_________________________________________________________
Number of
shares of Common Stock to be issued upon
Conversion:________________________________
Signature:
___________________________________________________________________________
Address:____________________________________________________________________________
18
