OMNIBUS AMENDMENT
This Omnibus Amendment (this "Supplement"), dated as of July 29, 2005,
by and between IT&E INTERNATIONAL GROUP, INC., a Nevada corporation (the
"Company"), and LAURUS MASTER FUND, LTD., a Cayman Islands company (the
"Purchaser"), amends that certain Securities Purchase Agreement, dated as of
October 18, 2004, by and between the Company and Purchaser (as amended, modified
or supplemented from time to time, the "Securities Purchase Agreement"); that
certain Registration Rights Agreement, dated as of October 18, 2004, by and
between the Company and the Purchaser (as amended, modified or supplemented from
time to time, the "Registration Rights Agreement"); and that certain Secured
Convertible Term Note, dated as of October 18, 2004, by the Company in favor of
Purchaser for the total principal amount of $5,000,000 (as amended, modified or
supplemented from time to time, the "Note"); the Restricted Account Side Letter,
dated as of October 18, 2004, by and between the Company and Purchaser (the
"Restricted Account Side Letter", collectively, with the Securities Purchase
Agreement, the Related Agreements (as defined in the Securities Purchase
Agreement), the Note, and the Registration Rights Agreement, the "Funding
Documents"). Capitalized terms used but not defined herein shall have the
meanings given them in the Securities Purchase Agreement.
PREAMBLE
WHEREAS, pursuant to the Funding Documents, the Purchaser agreed to
loan the Company a total principal amount of $5,000,000 ("Loan Amount"),
$2,500,000 of which was funded to the Company on October 18, 2004 and the
remaining $2,500,000 of which was funded to the Restricted Account (as defined
in the Securities Purchase Agreement); on April 14, 2005, the Purchaser agreed
to release to the Company an $500,000 from the Restricted Account; the Note is
convertible into shares of the Company's common stock (the "Note Shares") at an
initial fixed conversion price of $1.00;
WHEREAS, pursuant to the Funding Documents, the Company agreed to
register the Note Shares and Warrant Shares;
WHEREAS, in connection with the Funding Documents, the Purchaser was
granted a warrant to purchase 1,924,000 shares the Company's common stock (the
"Warrant");
WHEREAS, pursuant to the terms of the Funding Documents, the Company
filed a registration statement with the United States Securities and Exchange
Commission ("SEC") on November 17, 2004 (the "Registration Statement");
WHEREAS, the SEC has determined that the Purchaser is not irrevocably
bound to purchase the Note Shares attributable to the conversion of the Loan
Amount held in the Restricted Account and therefore the shares attributable to
the conversion of such amount may not be registered until the Purchaser is
irrevocably bound to purchase such Note Shares; and
WHEREAS, the Purchaser and the Company desire to amend the transactions
contemplated by the Funding Documents, to release, as of the date hereof, the
sum of $2,039,233.32 representing all of the funds held in the Restricted
Account as of the date hereof, which such funds shall be disbursed as follows:
(a) $1,911,164.20 will be wired to the Company or as otherwise directed by the
Company; and (b) $128,069.12 will be wired to the Purchaser in payment of
accrued and unpaid interest on the Note through the date hereof, such payments
to be made without applicable penalty or premium;
WHEREAS, the Company and the Purchaser have agreed to make certain
changes to the Note and the Registration Rights Agreement as set forth herein;
and
NOW, THEREFORE, in consideration of the covenants, agreements and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Terms of this Supplement; Release.
1.1 Release of Funds and Prepayment. As of the date hereof, the
Purchaser shall release, the sum of $2,039,233.32 (the "Funds") representing all
of the funds held in the Restricted Account as of the date hereof, which such
funds will be disbursed as follows: (a) $1,911,164.20 will be wired to the
Company or as otherwise directed by the Company; and (b) $128,069.12 will be
wired to the Purchaser in payment of accrued and unpaid interest on the Note
through the date hereof. Upon release of the Funds from the Restricted Account,
the Restricted Account shall be closed and the Restricted Account Agreement and
the Restricted Account Side Letter shall be deemed automatically terminated
without further action by either party hereto.
1.2 References to Restricted Account or the Restricted Account
Side Letter. All references to the Restricted Account or the Restricted Account
Side Letter contained in any of the (i) Securities Purchase Agreement, and (ii)
the Related Agreements referred to in the Purchase Agreement, are hereby deleted
and of no further force or effect.
2. Amendments.
2.1 The Registration Rights Agreement. The Purchaser and the
Company hereby amend the Registration Rights Agreement to delete the defined
term "Effectiveness Date" contained therein and in their stead, to insert the
following definition in lieu thereof:
"Effectiveness Date" means (i) with respect to the
initial Registration Statement required to be filed hereunder,
August 31, 2005 and (ii) with respect to each additional
Registration Statement required to be filed hereunder, a date no
later than thirty (30) days following the applicable Filing Date.
The Purchaser and the Company hereby agree and confirm that other than
as set forth herein, the terms of the Registration Rights Agreement otherwise
remain in full force and effect and, and without modification thereto.
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2.2 Amended and Restated Secured Convertible Term Note. The
Company shall issue the Purchaser an Amended and Restated Secured Convertible
Term Note (the "Amended and Restated Note") that is attached and incorporated
herein as Exhibit A in substitution and not in satisfaction of the Note. The
Amended and Restated Note shall include the following changes:
2.2.1 Amortizing Principal Amount. The "Amortizing
Principal Amount" shall be $5,000,000 of which amount, $2,500,000
was funded to the Company on October 18, 2004, $500,000 was
funded to the Company on April 14, 2004 and the remaining
$2,000,000 was funded to the Company on the date hereof.
2.2.2 Monthly Amount. The "Monthly Principal
Amount" shall be $176,923.08.
2.2.3 Fixed Conversion Price. The "Fixed
Conversion Price" shall be $0.2445.
2.3 Filing of Supplement. The Company hereby agrees to, on or
prior to August 31, 2005, file a Rule 424(b) supplement (the "Registration
Statement Supplement") to its Registration Statements with the Securities and
Exchange Commission (the "SEC") relating to the amendment and restatement of the
Note and the warrants issued in connection therewith (the "Existing Registration
Statement"), which Registration Statement Supplement states the amended Fixed
Conversion Price applicable to the Amended and Restated Note as set forth in
Section 3.2 of this Supplement.
2.4 Additional Registration. The Purchaser and the Company hereby
agree that, notwithstanding any prior agreement to the contrary, the shares of
Common Stock issuable as a result of the amendment and restatement of the Note
set forth in Section 3.2 hereof and the change to the fixed conversion price to
the Note as a result thereof, shall be registered in the Company's next
registration statement on Form SB-2 (or such other appropriate form, excluding a
Form S-8); provided, however, that the Company shall register such shares on a
date no later than September 1, 2005 (the "Filing Date"); provided, further,
that the Filing Date shall be deemed to be a "Filing Date" as defined in Section
1 of the Registration Rights Agreement.
3. Acknowledgments and Agreements with respect to various Related
Agreements.
3.1 For the avoidance of doubt, the Company hereby acknowledges
and confirms its due authorization, execution and delivery of the Securities
Purchase Agreement and all Related Agreements referred to therein (each as
amended, restated, modified and/or supplemented through and including the date
hereof) to which it is a party, including all instruments, financing statements,
agreements, certificates and documents executed and delivered in connection
therewith, and hereby ratifies all actions heretofore taken in connection
therewith, including, without limitation, the
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acknowledgement, ratification and confirmation of the grant by the Company to
the Purchaser of a security interest and charge, to the extent applicable, in
the assets of the Company as more specifically set forth in the Securities
Purchase Agreement and the Related Agreements referred to therein;
3.2 The Company further acknowledges, ratifies and confirms that
the obligations and liabilities under the Amended and Restated Note constitute
"Obligations" under the Master Security Agreement and the term "Obligations"
under the Master Security Agreement include, without limitation, all obligations
and liabilities of the Credit Parties to the Purchaser under the Securities
Purchase Agreement and the Related Agreements (as defined therein) and all other
obligations and liabilities of the undersigned to the Purchaser (including
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed or allowable in
such proceeding), whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent.
4. Miscellaneous.
4.1 This Supplement shall be effective as of the date hereof
following the execution and delivery of same by each of the Company and Laurus.
4.2 Except as specifically set forth in this Supplement, there
are no other amendments to the Note, and all of the other forms, terms and
provisions of the Note remain in full force and effect.
4.3 This Supplement shall be binding upon the parties hereto and
their respective successors and permitted assigns and shall inure to the benefit
of and be enforceable by each of the parties hereto and its successors and
permitted assigns. THIS SUPPLEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Supplement may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Supplement or has caused this Supplement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
COMPANY: PURCHASER:
IT&E INTERNATIONAL GROUP, INC. LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxx Grin
------------------------------- -------------------------------
Name: Xxxxx Xxxxxxxx Name: Xxxxxx Grin
------------------------------- -------------------------------
Title: Chief Executive Officer Title: Director
------------------------------- -------------------------------
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EXHIBIT A
AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. 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 AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT&E INTERNATIONAL GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE
--------------------------------------------------
FOR VALUE RECEIVED, IT&E INTERNATIONAL GROUP, INC., a California
corporation (the "Company"), hereby promises to pay to LAURUS MASTER FUND, LTD.,
M&C Corporate Services Limited, X.X. Xxx 000 XX, Xxxxxx House, South Church
Street, Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"Purchaser") or its registered assigns or successors in interest, on order, the
sum of Five Million Dollars ($5,000,000), together with any accrued and unpaid
interest hereon, on October 18, 2007 (the "Maturity Date") if not sooner paid.
The original principal amount of this Note is subject to amortizing payments
pursuant to Section 1.2 hereof is hereinafter referred to as the "Amortizing
Principal Amount" This Note amends and restates in its entirety, and is given in
substitution for and not in satisfaction of that certain promissory note in the
original principal amount of $5,000,000 issued by the Company in favor of the
Holder on October 18, 2004.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Company and the Purchaser (the "Purchase
Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1 (a) Interest Rate. Subject to Sections 1.1(b), 4.12 and 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the "Interest
Rate") equal to the "prime rate" published in The Wall Street Journal from time
to time, plus two and one half percent (2.50%). The Interest Rate shall be
increased or decreased as the case may be for each increase or decrease in the
prime rate in an amount equal to such increase or decrease in the prime rate;
each change to be effective as of the day of the change in such rate. Subject to
Section 1.1(b) hereof, the Interest Rate shall not be less than seven and one
quarter percent (7.25%). Interest shall be calculated on the basis of a 360 day
year. Interest on the Amortizing Principal Amount shall be payable monthly, in
arrears, commencing on November 1, 2004 and on the first day of each consecutive
calendar month
thereafter (each, a "Repayment Date") and on the Maturity Date, whether by
acceleration or otherwise.
1.1 (b) Interest Rate Adjustment. The Interest Rate shall be subject to
adjustment on the last business day of each month hereafter until the Maturity
Date (each a "Determination Date"). If on any Determination Date the Company
shall have registered under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of Common Stock underlying each of the conversion
of this Note and the exercise of the Warrant issued on a registration statement
declared effective by the Securities and Exchange Commission (the "SEC"), and
the market price (the "Market Price") of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as defined below) for the five (5)
consecutive trading days immediately preceding such Determination Date exceeds
the then applicable Fixed Conversion Price by at least twenty five percent
(25%), the Interest Rate for the succeeding calendar month shall automatically
be reduced by 200 basis points (200 b.p.) (2.0.%) for each incremental twenty
five percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price if the Company shall have listed the
shares of Common Stock underlying each of the conversion of this Note and the
exercise of the Warrant on the American Stock Exchange, the Nasdaq SmallCap
Market or the Nasdaq National Market for trading on such any such exchange. If
on any Determination Date the Company shall have registered under the Securities
Act the shares of Common Stock underlying the conversion of this Note and the
exercise of the Warrant on a registration statement declared effective by the
SEC, and the Market Price of the Common Stock as reported by Bloomberg, L.P. on
the NASD Over the Counter Bulletin Board for the five (5) consecutive trading
days immediately preceding such Determination Date exceeds the then applicable
Fixed Conversion Price by at least twenty five percent (25%), the Interest Rate
for the succeeding calendar month shall automatically be decreased by 100 basis
points (100 b.p.) (1.0.%) for each incremental twenty five percent (25%)
increase in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to the contrary
contained in herein), in no event shall the Interest Rate be less than zero
percent (0%).
1.2 Minimum Monthly Principal Payments. Amortizing payments of the
outstanding principal amount of this Note shall begin on September __, 2005 and
shall recur on each succeeding Repayment Date thereafter through and including
the Maturity Date until the Amortizing Principal Amount has been repaid in full,
whether by the payment of cash or by the conversion of such principal into
Common Stock pursuant to the terms hereof. Subject to Section 2.1 and Article 3
below, on each Repayment Date, the Company shall make payments to the Purchaser
in the amount of $176,923.08 (the "Monthly Principal Amount"), together with any
accrued and unpaid interest then due on such portion of the Amortizing Principal
Amount plus any and all other amounts which are then due and owing under this
Note that have not been paid (the Monthly Principal Amount, together with such
accrued and unpaid interest and such other amounts, collectively, the "Monthly
Amount"). Any outstanding Principal Amount together with any accrued and unpaid
interest and any and all other unpaid amounts which are then owing by the
Company to the Holder under this Note, the Purchase Agreement and/or any other
Related Agreement shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION REPAYMENT
2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the
Monthly Amount (or a portion thereof of such Monthly Amount if such portion of
the Monthly Amount would have been converted into shares of Common Stock but for
Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the
Company shall pay the Purchaser an amount equal to one hundred three percent
(103%) of the Monthly Amount due and owing to the Purchaser on the Repayment
Date in cash. If the Monthly Amount (or a portion of such Monthly Amount if not
all of the Monthly Amount may be converted into shares of Common Stock pursuant
to Section 3.2) is required to be paid in shares of Common Stock pursuant to
Section 2.1(b), the number of such shares to be issued by the Company to the
Purchaser on such Repayment Date (in respect of such portion of the Monthly
Amount converted into in shares of Common Stock pursuant to Section 2.1(b)),
shall be the number determined by dividing (x) the portion of the Monthly Amount
converted into shares of Common Stock, by (y) the then applicable Fixed
Conversion Price. For purposes hereof, the initial "Fixed Conversion Price"
means $0.2445.
(b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, the Purchaser shall convert into shares of Common
Stock all or a portion of the Monthly Amount due on each Repayment according to
the following guidelines (collectively, the "Conversion Criteria"): (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) consecutive trading days immediately preceding
such Notice Date shall be greater than or equal to 110% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed twenty five percent
(25%) of the aggregate dollar trading volume of the Common Stock for the twenty
two (22) day trading period immediately preceding the applicable Repayment Date.
If the Conversion Criteria are not met, the Purchaser shall convert only such
part of the Monthly Amount that meets the Conversion Criteria. Any part of the
Monthly Amount due on a Repayment Date that the Purchaser has not been able to
convert into shares of Common Stock due to failure to meet the Conversion
Criteria, shall be paid by the Company in cash at the rate of 103% of the
Monthly Amount otherwise due on such Repayment Date, within three (3) business
days of the applicable Repayment Date.
(c) Application of Conversion Amounts. Any amounts converted
by the Purchaser pursuant to Section 2.1(b) shall be deemed to constitute
payments of, or applied against, (i) first, outstanding fees, (ii) second,
accrued interest on the Amortizing Principal Amount, and (iii) third, the
Amortizing Principal Amount.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, no amount payable hereunder may be converted into Common Stock unless
(a) either (i) an effective current Registration Statement (as defined in the
Registration Rights Agreement) covering the shares of Common Stock to be issued
in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144 of the
Securities Act and under the registration, permit or qualification requirements
of all applicable state securities laws, and (b) no Event of Default hereunder
exists and is continuing, unless such Event of Default is cured within any
applicable cure period or is otherwise waived in writing by the Purchaser in
whole or in part at the Purchaser's option.
2.3 Optional Redemption of Amortizing Principal Amount. The Company
will have the option of prepaying the outstanding Amortizing Principal Amount
("Optional Amortizing Redemption"), in whole or in part, by paying to the
Purchaser a sum of money equal to one hundred twenty five percent (125%) of the
Amortizing Principal Amount to be redeemed, together with accrued but unpaid
interest thereon and any and all other sums due, accrued or payable to the
Purchaser arising under this Note, the Purchase Agreement or any Related
Agreement (the "Amortizing Redemption Amount") on the Amortizing Redemption
Payment Date (as defined below). The Company shall deliver to the Purchaser a
notice of redemption (the "Notice of Amortizing Redemption") specifying the date
for such Optional Amortizing Redemption (the "Amortizing Redemption Payment
Date"), which date shall be not less than seven (7) business days after the date
of the Notice of Amortizing Redemption (the "Redemption Period"). A Notice of
Amortizing Redemption shall not be effective with respect to any portion of the
Amortizing Principal Amount for which the Purchaser has a pending election to
convert pursuant to Section 3.1, or for conversions initiated or made by the
Purchaser pursuant to Section 3.1 during the Redemption Period. The Amortizing
Redemption Amount shall be determined as if such Purchaser's conversion
elections had been completed immediately prior to the date of the Notice of
Amortizing Redemption. On the Amortizing Redemption Payment Date, the Amortizing
Redemption Amount shall be paid in good funds to the Purchaser. In the event the
Company fails to pay the Amortizing Redemption Amount on the Amortizing
Redemption Payment Date as set forth herein, then such Notice of Amortizing
Redemption will be null and void.
2.4 Mandatory Conversion. Subject to Sections 2.2 and 3.2 hereof, if
(i) the average closing price of the Common Stock as reported by Bloomberg, L.P.
on the Principal Market for the five (5) consecutive trading days and is greater
than or equal to 400% of the Fixed Conversion Price, the Company may deliver a
written notice to the Purchaser (a "Mandatory Conversion Notice") requiring the
conversion into Common Stock of all or a portion of the outstanding Principal
Amount, provided however, that the amount of such conversion set forth in the
Mandatory Conversion Notice does not exceed twenty percent (20%) of the
aggregate dollar trading volume of the Common Stock for the twenty two (22) day
trading period immediately preceding the date of the applicable Mandatory
Conversion Notice (the "Mandatory Conversion Criteria"). If the Mandatory
Conversion Criteria are not met, the Purchaser shall convert only such portion
of the outstanding Principal Amount that meets the Mandatory Conversion
Criteria.
ARTICLE III
CONVERSION RIGHTS
3.1. Purchaser's Conversion Rights. Subject to Section 2.2, the
Purchaser shall have the right, but not the obligation, to convert all or any
portion of the then aggregate outstanding principal amount of this Note (the
"Principal Amount"), together with interest and fees due hereon, into shares
of Common Stock, subject to the terms and conditions set forth in this Article
III. The Purchaser may exercise such right by delivery to the Company of a
written Notice of Conversion pursuant to Section 3.3. The shares of Common Stock
to be issued upon such conversion are herein referred to as the "Conversion
Shares."
3.2 Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Purchaser shall not be entitled to convert pursuant to the
terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between 4.99% of the issued
and outstanding shares of Common Stock and the number of shares of Common Stock
beneficially owned by such Purchaser or issuable upon exercise of Warrants held
by such Purchaser. For the purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13d-3 thereunder. The Purchaser may void the
Conversion Share limitation described in this Section 3.2 upon 75 days prior
notice to the Company or without any notice requirement upon an Event of
Default.
3.3 Mechanics of Purchaser's Conversion. (a) In the event that the
Purchaser elects to convert any amounts outstanding under this Note into Common
Stock, the Purchaser shall give notice of such election by delivering an
executed and completed notice of conversion (a "Notice of Conversion") to the
Company, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees being converted. On
each Conversion Date (as hereinafter defined) and in accordance with its Notice
of Conversion, the Purchaser shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its records and shall
provide written notice thereof to the Company within two (2) business days after
the Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Company in accordance with the provisions hereof shall be
deemed a "Conversion Date". A form of Notice of Conversion to be employed by the
Purchaser is annexed hereto as Exhibit A.
(b) Pursuant to the terms of a Notice of Conversion, the
Company will issue instructions to the transfer agent accompanied by an opinion
of counsel, if so required by the Company's transfer agent, within one (1)
business day of the date of the delivery to Company of the Notice of Conversion
and shall cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Purchaser by crediting the account of the Purchaser's
designated broker with the Depository Trust Corporation ("DTC") through its
Deposit Withdrawal Agent Commission ("DWAC") system within three (3) business
days after receipt by the Company of the Notice of Conversion (the "Delivery
Date"). In the case of the exercise of the conversion rights set forth herein
the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Company of the Notice of Conversion. The
Purchaser shall be treated for all purposes as the record Purchaser of such
shares of Common Stock, unless the Purchaser provides the Company written
instructions to the contrary.
3.4 Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon
each conversion of
this Note pursuant to this Article III shall be determined by dividing that
portion of the Principal Amount and interest and fees to be converted, if any,
by the then applicable Fixed Conversion Price. In the event of any conversions
of outstanding obligations under this Note in part pursuant to this Article III,
such conversions shall be deemed to constitute conversions (i) first, of the
Monthly Amount for the current calendar month, and (ii) then of outstanding
Amortizing Principal Amount, by applying the conversion amount to Monthly
Principal Amounts for the remaining Repayment Dates in chronological order.
(b) The Fixed Conversion Price and number and kind of shares
or other securities to be issued upon conversion are subject to adjustment from
time to time upon the occurrence of certain events, as follows:
A. Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is paid on
the Common Stock in shares of Common Stock, the Fixed Conversion Price
or the Conversion Price, as the case may be, shall be proportionately
reduced in case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of shares, in each
such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of
shares of Common Stock outstanding immediately prior to such event.
B. During the period the conversion right exists, the
Company will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock
upon the full conversion of this Note. The Company represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Company 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.
C. Share Issuances. Subject to the provisions of this
Section 3.4, if the Company shall at any time prior to the conversion
or repayment in full of the Principal Amount issue any shares of Common
Stock or securities convertible into Common Stock to a person other
than the Purchaser (except (i) pursuant to Subsections A or B above;
(ii) pursuant to options, warrants or other obligations to issue shares
outstanding on the date hereof as disclosed to Purchaser in writing; or
(iii) pursuant to options that may be issued under any employee
incentive stock option and/or any qualified stock option plan adopted
by the Company) for a consideration per share (the "Offer Price") less
than the Fixed Conversion Price in effect at the time of such issuance,
then the Fixed Conversion Price shall be immediately reset to such
lower Offer Price. For purposes hereof, the issuance of any security of
the Company convertible into or exercisable or exchangeable for Common
Stock shall result in an adjustment to the Fixed Conversion Price at
the time of issuance of such securities.
D. Reclassification, etc. If the Company at any time
shall, by reclassification or otherwise, change the Common Stock into
the same or a different number of securities of any class or classes,
this Note, as to the unpaid Principal Amount and accrued interest
thereon, shall thereafter be deemed to evidence the right to purchase
an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the
Common Stock immediately prior to such reclassification or other
change.
3.5 Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall (in exchange for presentation of the Note for cancellation by the
Company), at the written request of the Purchaser, be issued by the Company to
the Purchaser for the outstanding Principal Amount of this Note and accrued
interest which shall not have been converted or paid. Subject to the provisions
of Article IV, the Company will pay no costs, fees or any other consideration to
the Purchaser for the production and issuance of a replacement Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable cure or grace period, the Purchaser may make all sums of principal,
interest and other fees then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable. In the event of such an
acceleration, the amount due and owing to the Purchaser shall be the sum of (i)
125% of the outstanding Amortizing Principal Amount l of the Note (such amount
to include accrued and unpaid interest and fees, if any) (the "Default
Payment"). The Default Payment shall be applied first to any fees due and
payable to Purchaser pursuant to this Note, the Purchase Agreement or the
Related Agreements, then to accrued and unpaid interest due on the Note and then
to outstanding principal balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "Event of Default":
4.1 Failure to Pay Principal, Interest or other Fees. (i) The Company
fails to pay when due, any installment of principal, interest or other fees
hereon in accordance herewith , or (ii) the Company fails to pay, when due, any
amount due (in excess of $100,000 in the aggregate at any time outstanding)
under any other promissory note issued by the Company and in any such case, such
failure shall continue for a period of three (3) days following the date such
payment was due .
4.2 Breach of Covenant. The Company breaches any covenant or any other
term or condition of this Note, the Purchase Agreement or any Related Agreement
in any material respect, and, in any such case, such breach, if subject to cure,
continues for a period of thirty (30) days after the occurrence thereof.
4.3 Breach of Representations and Warranties. Any representation or
warranty made by
the Company in this Note, the Purchase Agreement or any Related Agreement,
shall, in any such case, be false or misleading in any material respect on the
date that such representation or warranty was made or deemed made.
4.4 Receiver or Trustee. The Company 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.
4.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against the Company or any of its property or other assets
for more than $100,000 and shall remain unvacated, unbonded or unstayed for a
period of thirty (30) days.
4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by the Company, or if against the
Company, such proceedings shall not dismissed within thirty (30) days.
4.7 Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Company shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock).
4.8 Failure to Deliver Common Stock or Replacement Note. The Company
shall fail (i) to timely deliver Common Stock to the Purchaser pursuant to and
in the form required by this Note, and Section 9 of the Purchase Agreement, if
such failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Purchaser within seven
(7) business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).
4.9 Default Under Related Agreements or Other Agreements. The
occurrence and continuance of any Event of Default (as defined in the Purchase
Agreement or any Related Agreement) or any event of default (or similar term)
under any other indebtedness in excess of $100,000 that causes acceleration of
such indebtedness.
4.10 Change in Control. There shall be a change in control in the
record or beneficial ownership of an aggregate of more than forty percent (40%)
of the outstanding Common Stock, in one or more transactions, compared to the
ownership of outstanding shares of Common Stock on the date hereof, without the
prior written consent of Holder, which consent shall not be unreasonably
withheld (other than the sale of the Borrower's equity securities in a public
offering or to venture
capital or other private equity investors so long as the Borrower identifies and
advises Holder prior to the closing of the investment or to strategic investors
so long as Borrower identifies the strategic investor prior to the closing of
the investment or issuances to the Holder) unless in the event the Company shall
dissolve, liquidate or merge with any other person or entity, the Company is the
surviving entity or the successor entity is solvent and expressly assumes all of
the duties and obligations of the Company and its Subsidiaries under this
Agreement and Related Agreements.
DEFAULT RELATED PROVISIONS
4.11 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional interest on
this Note in an amount equal to one and one half percent (1.50%) per month and
all outstanding obligations under this Note, including unpaid interest, shall
continue to accrue such additional interest from the date of such Event of
Default until the date such Event of Default is cured or waived.
4.12 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.
4.13 Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of the Purchaser 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. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at the address provided in the Purchase Agreement executed in connection
herewith, and to the Purchaser at the address provided in the Purchase Agreement
for such Purchaser, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000, or at such
other address as the Company or the Purchaser may designate by ten days advance
written notice to the other parties hereto. A Notice of Conversion shall be
deemed given when made to the Company pursuant to the Purchase Agreement.
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, and any successor
instrument issued pursuant to Section 3.5 hereof, as it may be amended or
supplemented.
5.4 Assignability. This Note shall be binding upon the Company and its
successors and assigns, and shall inure to the benefit of the Purchaser and its
successors and assigns, and may be transferred by the Purchaser only in
accordance with the requirements of the Purchase Agreement and all applicable
federal and state securities laws. This Note shall not be assigned by the
Company without the consent of the Purchaser.
5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties agree to submit to the jurisdiction of such courts. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Note is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or unenforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Purchaser from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company's obligations to
Purchaser, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court in favor of the Purchaser.
5.6 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 Company to the Purchaser and thus refunded to the
Company.
5.7 Security Interest. The Purchaser of this Note has been granted a
security interest in certain assets of the Company more fully described in a
Master Security Agreement dated as of October 18, 2005.
5.8 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
5.9 Cost of Collection. If default is made in the payment of this Note,
the Company shall pay to Purchaser reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name effective as of this 29th day of July 2005.
IT&E INTERNATIONAL GROUP, INC.
By: /s/ Xxxxx Xxxxxxxx
----------------------------------
Name:
Title:
EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Purchaser in order to convert all or part of the Note
into Common Stock)
[Name and Address of Purchaser]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Amended and Restated Convertible Term Note
issued by IT&E INTERNATIONAL GROUP, INC. dated July __, 2005 by delivery of
Shares of Common Stock of IT&E INTERNATIONAL GROUP, INC. on and subject to the
conditions set forth in Article III of such Note.
1. Date of Conversion
-----------------------
2. Shares To Be Delivered:
-----------------------
By: -----------------------
Name: -----------------------
Title: -----------------------
