EXHIBIT 10.10
INTEGRATED ALARM SERVICES GROUP, INC.
9% CONVERTIBLE SECURED NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN
TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW
WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION
AND QUALIFICATION ARE NOT REQUIRED.
$________ Date:__________
FOR VALUE RECEIVED, Integrated Alarm Services Group, Inc., a Delaware
corporation ("Borrower"), hereby unconditionally promises to pay as set forth
herein to the order of _______________ ("Lender"), in lawful money of and within
the United States of America and in immediately available funds, the principal
sum of $________ (the "Principal Amount"), together with accrued and unpaid
interest thereon, in the manner set forth herein. Xxxxxxxx further agrees to pay
interest on the Principal Amount at the annual rate of 9% (the "Stated Interest
Rate") on the outstanding Principal Amount. Interest shall be calculated from
and including the date of this Note until such Principal Amount has been repaid
in full or until the Note has been converted. Interest shall be paid quarterly,
commencing on the first business day of January 2003, and on the first business
day of each quarter thereafter including the Maturity Date, as defined below.
Interest shall be calculated on the basis of a 365-day year.
1. Principal Repayment.
The outstanding Principal Amount, including the interest accrued
thereon, shall be payable three years from the date of issuance (the "Issuance
Date") of the Note, unless such Note shall have been converted in accordance
with Section 2 below. The date of repayment is referred to herein as the
"Maturity Date."
2. Conversion. The Note shall be convertible into shares of common stock of the
Company (the "Common Stock") at any time from the Issuance Date until the
Maturity Date, which conversion, if any, shall occur at the option of the
Lender. The Note shall be converted into shares of Common Stock at the
conversion price (the "Conversion Price") of $4.76 per share of Common Stock,
subject to adjustment as provided below.
In the event that the Company completes an initial public offering (an
"IPO") of its shares of Common Stock prior to the Maturity Date and such shares
of Common Stock are offered to the public at less that $6.35 per share, then the
Conversion Price shall be decreased such that the amended Conversion Price shall
represent 75% of the price at which such shares are offered in the IPO. In no
event will the Conversion Price exceed $4.76 per share, except in the case of a
stock split, recapitalization or reclassification of the shares of Common Stock
where the Conversion Price will continue to be at a 25% discount to the initial
public offering price per share of common stock.
3. Place of Payment; Application of Payments. All amounts payable hereunder
shall be payable to Lender in United States dollars to such bank account as
shall be designated by Lender in immediately available funds or as otherwise
specified to Borrower in writing. Payment on this Note shall be applied first to
any expenses of collection, then to accrued interest, and thereafter to the
outstanding principal balance hereof.
4. Default. The following events shall each be an "Event of Default" under this
Note:
A. bankruptcy or insolvency of Borrower;
X. Xxxxxxxx's failure to pay any of the Principal Amount due under this
Note on the date the same becomes due and payable, or any accrued interest or
other amounts due under this Note after the same becomes due and payable; and
C. breach of any material covenant or agreement contained in this Note
and such breach remains uncured for a period of 15 days after written notice
thereof is received by Borrower from Lender.
Upon the occurrence of an Event of Default, the unpaid Principal
Amount, all unpaid accrued interest thereon and all other amounts owing
hereunder may, at the option of Xxxxxx, become immediately due and payable to
Lender, provided, however, that upon the occurrence of an Event of Default
described in Section 4(a), all indebtedness of Borrower to Lender shall become
immediately due and payable without any action of Lender. Effective upon an
Event of Default that is not cured for a period of 30 days after such Event of
Default, the interest rate on this Note shall increase to 15% per annum.
5. Covenants.
A. Compliance with Agreements. The Borrower shall perform and observe,
or cause to be performed or observed, as the case may be, all of the provisions
in its certificate of incorporation, its bylaws, and the obligations pursuant to
the terms, agreements and covenants of this Note and all documents and
agreements executed or delivered in connection with this Note. The Borrower
expressly represents that Xxxxxxxx has the full power and authority to deliver
the Note, that the Note has been duly authorized, executed and delivered by the
Borrower, and Xxxxxxxx's obligations under the Note are legal, valid, binding
and enforceable, absolute and unconditional.
B. Preservation of Corporate Existence and Business. The Borrower shall
use best efforts to preserve intact its present business organization, rights
and privileges and present goodwill and, to the best of its ability, its
relationships existing with other parties and shall at all times cause to be
done all things necessary to maintain, preserve, and renew its corporate
existence and shall observe and conform with all valid requirements of all
governmental authorities relating to the conduct of the business of the
Borrower, the failure of which would have a material adverse effect upon the
Borrower's business or financial condition. The Borrower shall maintain and keep
in force all material licenses, permits and agreements necessary to the conduct
of its businesses.
C. Maintenance of Properties. The Borrower shall maintain and keep its
properties, real and personal, in good repair, working order, and condition, and
from time to time make all necessary or desirable repairs, renewals, and
replacements, so that its business may be properly and advantageously conducted
at all times.
D. Taxes and Other Obligations. The Borrower shall pay and discharge
all taxes, assessments, interest and installments on mortgages and governmental
charges against it or against any of its properties, upon the respective dates
when due, except to the extent that such taxes, assessments, interest,
installments and governmental charges are contested in good faith and by
appropriate proceedings.
E. Compliance with Obligations, Laws, Etc. The Borrower shall comply
with all of the obligations which it has incurred or to which it becomes subject
pursuant to any contract or agreement, whether oral or written, express or
implied, the breach of which might have a material adverse effect upon its
business or financial condition, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves have been set aside on its books with respect thereto. The Borrower
shall comply with all applicable laws, rules and regulations of all governmental
authorities.
6. Waiver. TO THE FULLEST EXTENT PERMITTED BY LAW, XXXXXX AND XXXXXXXX AGREE
THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (i) SEEK A JURY TRIAL
IN ANY
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LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT
OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN THEM, (ii) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (iii) MAKE ANY CLAIM FOR
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH
HAVE BEEN FULLY DISCUSSED BY XXXXXX AND BORROWER, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES. XXXXXXXX WAIVES PRESENTMENT AND WRITTEN DEMAND FOR
PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE
RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS
HEREUNDER IS HEREBY WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.
7. Attorney's Fees; Collection Costs. If there has been an Event of Default by
Borrower hereunder, Xxxxxx shall be entitled to receive and Xxxxxxxx agrees to
pay all costs of enforcement and collection incurred by Xxxxxx, including,
without limitation, reasonable attorney's fees relating thereto.
8. Notices. Unless otherwise specified herein, all notices hereunder shall be in
writing and shall be deemed to have been given when delivered by hand, or on the
third business day after properly deposited with the United States Postal
Service, as certified mail, return receipt requested, postage prepaid, or on the
first business day after properly deposited with an overnight courier of
national standing, addressed to the address indicated below:
If to the Borrower, at:
One Capital Centre
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx XxXxxx, Co-Chief Executive Officer
If to the Lender, at:
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or at any other address specified by Borrower or Lender in writing.
9. Expenses. The Borrower shall pay all expenses of the Lender in connection
with the preparation of this Note or other documents executed in connection
therewith, including, without limitation, fees of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any fees or expenses associated
with any travel or other costs relating to any appraisals or examinations
conducted in connection with the obligations hereunder, provided that Borrower
shall not have to pay any such expenses in excess of $5,000, and the amount of
all such expenses shall, until paid, bear interest at the rate applicable to
principal hereunder. The Borrower shall also pay all expenses of the Lender in
connection with the waiver or amendment of this Note and the administration,
default or collection of any amount due under this Note or other obligations or
administration, default, collection in connection with the Lender's exercise,
preservation or enforcement of any of its rights, remedies or options hereunder,
including, without limitation, fees of outside legal counsel or the allocated
costs of in-house legal counsel, accounting, consulting, brokerage or other
similar professional fees or expenses, and any fees or expenses associated with
any travel or other costs relating to any appraisals or examinations conducted
in connection with the obligations hereunder, and the amount of all such
expenses shall, until paid, bear interest at the rate applicable to principal
hereunder.
10. Set-Off. Regardless of any means of obtaining repayment of the obligations
hereunder, any deposits, balances or other sums credited by or due from the
Lender to the Borrower may, at any time and from time to time, without notice to
the Borrower or compliance with any other condition precedent now or hereafter
imposed by statute, rule of law, or otherwise (all of which are hereby expressly
waived) be set off, appropriated, and applied by the Lender against any and all
obligations of the Borrower to the Lender or any of its affiliates in such
manner as the Lender in its sole discretion may determine, and the Borrower
hereby grants to the Lender a continuing security interest in such deposits,
balances or other sums for the payment and performance of all such obligations.
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11. No Waivers of Xxxxxx's Rights. No failure or delay by the Lender in
exercising any right, power or privilege hereunder or under any other documents
or agreements executed in connection herewith shall operate as a waiver thereof;
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies in this Note provided are cumulative and not exclusive of
any rights or remedies otherwise provided by agreement or law.
12. Amendments. Neither this Note nor any provision hereof may be amended,
waived, discharged or terminated except by a written instrument signed by the
Lender and, in the case of amendments, by the Borrower.
13. Binding Effect of Note. This Note shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns; provided that neither the Borrower nor the Lender may assign or
transfer its rights or obligations hereunder.
14. Partial Invalidity. The invalidity or unenforceability of any one or more
phrases, clauses or sections of this Note shall not affect the validity or
enforceability of the remaining portions of it.
15. Captions. The captions and headings of the various sections and subsections
of this Note are provided for convenience only and shall not be construed to
modify the meaning of such sections or subsections.
16. Entire Agreement. This Note and the documents and any agreements executed in
connection herewith constitute the final agreement of the parties hereto and
supersede any prior agreement or understanding, written or oral, with respect to
the matters contained herein and therein.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE CITY OF ALBANY, STATE OF NEW
YORK, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCLUDING
CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY
OTHER JURISDICTION.
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IN WITNESS WHEREOF, this Note has been executed and delivered on the
date specified above by the duly authorized representative of the Company.
INTEGRATED ALARM SERVICES GROUP, INC.
By:
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Name: Xxxxxxx XxXxxx
Title: Co-Chief Executive Officer
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