EXHIBIT 4.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), IN RELIANCE UPON EXEMPTIONS CONTAINED IN SECTION 4(2) OF THE ACT
AND/OR REGULATIONS D AND/OR S PROMULGATED PURSUANT THERETO, NOR HAS THIS NOTE
BEEN REGISTERED OR QUALIFIED IN ANY STATE IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THIS NOTE MAY
NOT BE RESOLD OR TRANSFERRED BY THE HOLDER UNLESS IT IS SUBSEQUENTLY REGISTERED
UNDER FEDERAL AND APPLICABLE STATE SECURITIES LAWS OR EXEMPTIONS FROM
REGISTRATION AND QUALIFICATION ARE AVAILABLE.
NUMBER AMOUNT
___________ $_____________
AIR PACKAGING TECHNOLOGIES,INC.
7% Secured Convertible Note Due 2003
AIR PACKAGING SYSTEMS, INC., a corporation duly organized and existing
under the laws of the State of Delaware (the "Company"), for value received,
hereby promises to pay to_____________________, or registered assigns, the
principal sum of _________________, Dollars on September 30, 2003, and to pay
interest thereon annually on June 30 (each an "Interest Payment Date") accruing
from and after the date of original issuance of this Note in each year,
commencing on June 30, 2003, at 7% per annum, until the principal hereof is paid
or made available for payment. Interest will be computed on the basis of a 365-
or 366- day year, as the case may be.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Note is registered at the close of business on the regular
record date, which shall be the June 15 (whether or not a Business Day), as the
case may be, preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for, and any interest payable on such defaulted
interest (to the extent lawful), will forthwith cease to be payable to the
Holder on such regular record date and shall be paid to the person in whose name
this Note is registered at the close of business on a special record date for
the payment of such defaulted interest fixed by the Company, notice of which
shall be given to Holders not less than 15 days prior to such special record
date. Payment of the principal of and interest on this Note will be made at the
principal corporate office of the Company and at any other office or agency
maintained by the Company for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
person entitled thereto as such address shall appear in the Note register.
Reference is hereby made to the further provisions of this Note set forth
on the attached pages hereto, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, AIR PACKAGING TECHNOLOGIES, INC. has caused this
instrument to be executed in its corporate name by the signature of its
President and its Secretary and has caused its corporate seal to be affixed
hereunto or imprinted hereon.
Date of Original Issuance:
Date:
AIR PACKAGING TECHNOLOGIES, INC.
By:
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President
[SEAL]
By:
---------------------------------
Secretary
ASSIGNMENT FORM
To assign this note, fill in form below:
For Value received, hereby sells, assigns and
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transfers this note to
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Assignee's name Social security or
taxpayer I.D. Number
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Assignee's mailing address City, State, Country, Zip
and does hereby irrevocably constitute and appoint
---------------------------------------- Attorney to transfer this note of the
books of the registrar with full power of substitution in the premises.
DATED this ,
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Bondholder's Signature
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Bondholder's Signature
SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE.
CONVERSION NOTICE
The Undersigned does hereby elect to convert this note (if only a partial
conversion state amount here $ ) into Common Stock of Air Packaging
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Technologies, Inc. and requests that the certificate(s) issuable upon
conversion be issued in my name or (if filled out) as below:
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Name Social security or taxpayer
I.D. Number
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Mailing address City, State, Country, Zip
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Bondholder's Signature
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Bondholder's Signature
SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE.
AIR PACKAGING TECHNOLOGIES, INC.
7% CONVERTIBLE NOTES DUE 2003
ADDITIONAL TERMS AND CONDITIONS
1. GENERAL.
This Note is one of a duly authorized issue of Notes of the Company
designated as its 7% Convertible Notes Due 2003. The terms of the Notes include
those stated below. The Notes are general obligations of the Company limited to
$2,000,000 in aggregate principal amount. The Notes are unsecured but are
senior in rights to all other debentures issued by the Company, whether
presently outstanding or issued in the future.
2. PAYING AGENT, CONVERSION AGENT AND REGISTRAR.
Initially, the Company will act as its own Paying Agent, Conversion Agent
and Registrar. The Company may change any Paying Agent, Conversion Agent,
Registrar or co-registrar without notice.
3. DEFINITIONS.
"ACT" shall mean the Securities Act of 1933, as amended, and the Rules
promulgated thereunder.
"AVERAGE CLOSING PRICE" shall mean the average of the highest closing bid
prices of the Company's common stock for each of the thirty (30) business days,
immediately prior to Payment Date or Record Date, as the case may be, on the OTC
Bulletin Board or such other place that the Company's common stock may be
trading on payment date.
"BUSINESS DAY" shall mean Monday through Friday of each week, excluding any
day that is a legal holiday in the State of California.
"COMMON STOCK" shall mean the Common Stock, $0.001 par value, of the
Company, as designated on the date hereof, or shares of any class or classes of
Capital Stock resulting from reclassification or reclassification thereof.
"COMPANY" shall mean Air Packaging Technologies, Inc., a Delaware
Corporation.
"HOLDER" shall mean the person in whose name the Notes are registered on
the Company's books.
"INTEREST PAYMENT DATE" or "PAYMENT DATE" shall mean June 30 of each year.
"NOTES" shall mean the 7% Convertible Debentures Due 2003.
"SEC" shall mean the United States Securities and Exchange Commission.
4. XXXXXX'S OPTION TO TAKE STOCK IN LIEU OF CASH INTEREST PAYMENT
At Holder's option, holder may elect to receive any annual interest payment
in common stock of the Company at a 20% discount to the Average Closing Price,
subject to the following:
(a) Company must receive from holder a written notice of Xxxxxx's election
a minimum of fifteen (15) days prior to the Payment Date.
(b) All stock to be issued shall be "restricted" as that term is generally
used under the Act and, as such, shall contain a legend thereon restricting
their sale, transfer, or hypothecation unless an effective registration
statement is in effect or an exemption from registration applies to the specific
instance.
(c) After notice of Xxxxxx's election, the Company may elect, within
fifteen (15) days, to register said dividend shares under an appropriate
registration statement to be filed with the SEC. If the Company makes this
election, the interest payment will be payable in common stock of the Company at
the Average Closing Price of the Company's common stock, with no discount
thereon and Company will use its best efforts to register said shares as soon as
practicable after such election.
(d) Notwithstanding anything to the contrary, the minimum price to be used
to compute the number of shares to be issued as an interest payment shall be
$0.15.
5. REGISTRATION RIGHTS.
Company undertakes to use its best efforts to register, for resale, the
Notes and/or the common stock issuable upon conversion of the notes, with the
SEC on an applicable registration form and to maintain said registration until
six (6) months after conversion of all of the debentures, expiration of the
conversion rights, or until the Company shall have received an opinion of
Counsel that the shares of the Common Stock issued or issuable upon conversion
of the Notes may be resold by the Holders thereof without an effective
registration statement under the Act pursuant to Rule 144 (k).
6. OPTIONAL CONVERSION.
Subject to the provisions contained herein, a Holder of a Note is entitled,
at his option, at any time on or before the close of business on September 30,
2003, to convert the principal amount of such Note or any portion of the
principal amount thereof which is $1,000 or an integral multiple of $1,000, into
shares of Common Stock of the Company at a Conversion Price as provided below
(or at the current adjusted Conversion Price if an adjustment has been made as
provided in Section 10 below "Adjustments to Conversion Price). No fractions of
shares or scrip representing fractions of shares will be issued on conversion of
a Note, but an adjustment in cash will be made for any fractional interest as
provided in the Indenture.
(a) The Conversion price shall be $0.15 per share through and including
September 30, 2001.
(b) The Conversion price shall be $0.25 per share from October 1, 2001 through
and including September 30, 2003.
(c) The minimum amount of debentures that may be converted by any holder at any
one time shall be $100,000 and must be in integral multiples of $1,000.
(d) To convert a Note, a Holder must (i) complete and sign the conversion
notice attached to the Note, (ii) surrender the Note with the conversion notice
to the Conversion Agent, (iii) furnish appropriate endorsements and transfer
documents if required by the Registrar or Conversion Agent, and (iv) pay any
transfer or similar tax, if required.
7. DENOMINATIONS, PAYMENT, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
and integral multiples thereof. A Holder may transfer Notes in accordance with
the reasonable rules set forth by the Registrar. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law. The Registrar need not
transfer any Note until it has received an opinion of Counsel that the transfer
may be made pursuant to any effective registration or pursuant to an exemption
from registration. Holders must surrender Notes to a Paying Agent to receive
principal payments thereof.
8. PERSONS DEEMED OWNERS.
Prior to due presentment of this Note for registration of a transfer, the
Company, the Trustee and any agent of either may treat the registered Holder of
this Note as the owner of it for all purposes.
9. DEFAULTS AND RIGHTS TO PAYMENT.
Event of Default. An "Event of Default" with respect to any Security occurs
if:
(a) The Company defaults in the payment of interest on any Security when
the same becomes due and payable and the default continues for a period of 30
days; or
(b) The Company defaults in the payment of Principal of any Security when the
same becomes due and payable at maturity or otherwise; or
(c) The Company fails to comply with any other material agreement set forth in
the Securities and the default continues for a period of 30 days after notice of
such default is delivered to the Company by the Holder; provided,. however, that
if the default is such that it cannot, in the exercise of reasonable diligence
be corrected within such period, it shall not constitute an Event of Default
hereunder if corrective action is instituted promptly by the Company within said
period and is diligently pursued until the default is corrected; or
(d) A court of competent jurisdiction enters a judgment, decree or order for
relief in respect of the Company or any Subsidiary in an involuntary case or
proceeding under any Bankruptcy Law which shall (A) approve as properly filed a
petition seeking reorganization, arrangement, adjustment or .composition in
respect of the Company, (B) appoint a Custodian of the Company for all or
substantially all of the property of the Company; or (C) provide for the
winding-up or liquidation of the affairs of the Company; and such judgment,
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or any bankruptcy or insolvency petition or application is
filed, or any bankruptcy or insolvency proceeding is commenced against the
Company and such petition, application or proceeding is not dismissed within 90
days; or any warrant of attachment is issued against any substantial portion of
the property of the Company which is not released, bonded or stayed within 90
days of service;
(e) The Company shall (A) commence a voluntary case or proceeding under any
Bankruptcy Law, (B) consent to the entry of a judgment, decree or order for
relief in an involuntary case or proceeding under any Bankruptcy Law, (C)
consent to the institution of bankruptcy or insolvency proceedings against it,
or (D) apply for, consent to, or acquiesce in the appointment of or taking
possession by a Custodian of the Company or for any substantial part of the
property of the Company.
The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any
custodian, receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
Acceleration. If an Event of Default (other than an Event of Default
specified in clauses (d) and (e) of Section 9) occurs and is continuing, the
Holder by notice to the Company, may declare the Principal of and accrued
interest on all the Securities to be due and payable. Upon any such declaration
such Principal and interest shall be due and payable immediately. If an Event
of Default specified in clause (4) or (5) of Section occurs, such amount shall
de facto become and be immediately due and payable without any declaration.
Rights of Holders to Receive Payment. Notwithstanding any other provision
of this debenture, the right of any Holder of a Security to receive payment of
Principal of or interest on the Security on or after the respective dates
expressed in the Security or after acceleration provided for herein or to bring
suit for the enforcement of any such payment on or after such respective dates,
or for the right to convert the Security, shall not be impaired or affected
without the consent of the Holder.
10. ADJUSTMENT OF CONVERSION PRICE
Adjustment of Conversion Price. The Conversion Price shall be subject to
adjustment from time to Time as follows:
(a) In case the Company shall (i) declare a dividend or make a distribution on
the outstanding shares of its Common Stock, (ii) subdivide or reclassify the
outstanding shares of its Common Stock into a greater number of shares, or (iii)
combine or reclassify the outstanding shares of its Common Stock into a smaller
number of shares, then the Conversion Price in effect at the time of,
respectively, the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the Holder of any Security surrendered for
conversion after such time shall be entitled to receive the number of shares of
Common Stock which he would have owned or been entitled to receive had such
Security been converted immediately prior to such time. Any shares of Common
Stock issuable in payment of a dividend shall be deemed to have been issued
immediately prior to the time of the record date for such dividend for purposes
of calculating the number of outstanding shares of Common Stock under
subsections (b) and (c) below. Such adjustments shall be made successively
whenever any event specified above shall occur. In the event that any such
dividend, subdivision, reclassification or combination causing any such
adjustment does not thereafter occur, then the adjusted Conversion Price then in
effect shall be readjusted, effective as of the date when the Board of
Directors determines not to effect such dividend, subdivision, reclassification
or combination, to the Conversion Price which would then be in effect if such
record date or effective date had not been
(b) In case the Company shall fix a record date for the issuance of rights or
warrants to all holders of its Common Stock without any charge to such holders
entitling them (for a period expiring within 45 days after the record date
mentioned above) to subscribe for or purchase shares of its Common Stock (or
securities convertible into shares of its Common Stock) at a price per share (or
having an initial conversion price per share) less than the Current Market Price
(as defined) of the Common Stock on such record date, the Conversion Price shall
be adjusted immediately thereafter so that it shall equal the price determined
by multiplying the Conversion Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate offering price of the number of shares of such Common Stock so
offered for subscription or purchase (or the aggregate initial conversion price
of the convertible securities so offered) would purchase at the Current Market
Price per share, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock so offered for subscription or purchase (or into which
the convertible securities so offered are initially convertible) . Shares of
Common Stock owned by or held for the Company shall not be deemed outstanding
for the purpose of any computation. Such adjustment shall be made successively
whenever such a record date is fixed. In the event that any such rights or
warrants (or convertible securities), as the case may be, to the Conversion
Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of shares of its Common Stock (i) of shares of any
class other than its Common Stock or (ii) of evidences of indebtedness of the
Company or any Subsidiary or (iii) of assets (excluding cash dividends or
distributions referred to in subsection (a) above) or (iv) of rights or warrants
(excluding those referred to in subsection (b) above), in each such case the
Conversion Price shall be adjusted immediately thereafter so that it shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on such record date multiplied by the Current
Market Price per share on such record date, less the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive,
and described in a Board Resolution filed with the Trustee) of said shares or
evidences of indebtedness or assets or rights or warrants so distributed, and of
which the denominator shall be the number of shares of Common Stock outstanding
on such record date multiplied by such Current Market Price per share. Such
adjustment shall be made successively whenever such a record date is fixed. In
the event that any such distribution is thereafter no so made, then the adjusted
Conversion Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, rights or warrants, as the case may be, to the
Conversion Price which would then be in effect if such record date had not been
fixed.
(d) For the purpose of any computation under subsections (b) and (c) above, the
"Current Market Price" per share at any date shall be deemed to be the Average
Closing Price of the Company's common stock.
(e) In any case in which this Article X shall require that an adjustment shall
become effective immediately after a record date for an event, the Company may
defer until the occurrence of such event (i) issuing to the Holder of any
Security converted after such record date and before the occurrence of such
event the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the shares of
Common Stock issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such Holder any amount in cash in lieu of a
fractional share of Common Stock pursuant to Section 10.6; provided, however,
that the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's rights to receive such additional shares of
Common Stock, and such cash, upon the occurrence of the event requiring such
adjustment.
(f) No adjustment in the Conversion Price shall be required with respect to
shares of Common Stock issued upon conversion of the Securities unless such
adjustment would require an increase or decrease in the amount equal to at least
one percent of such price; provided, however, that any such adjustment which is
not required to be made shall be carried forward and taken into account in any
subsequent adjustment made not later than three years after the happening of the
specified event or events.
(g) The Company from time to time may reduce the Conversion Price by any amount
for any period of time if the reduction is irrevocable during the period.
(h) All calculations under this Article X shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Whenever the Conversion Price is reduced, the Company shall mail to Holders
of the Securities a notice of the reduction. The Company shall mail the notice
at least 15 days before the date the reduced Conversion Price takes effect. The
notice shall state the reduced Conversion Price and the period for which it will
be in effect.
A reduction of the Conversion Price does not change or adjust the
Conversion Price otherwise in effect for purposes of this Section.
11. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER, SALE, LEASE OR
CONVEYANCE.
(a) In case of any consolidation with or merger of the Company into another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation), or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, such successor, leasing or purchasing corporation, as the case may be,
shall execute a supplemental debenture providing that the Holder of each
Security then outstanding shall have the right thereafter to convert such
Security solely into the kind and amount of shares of stock, other securities,
property or cash or any combination thereof receivable -upon such consolidation,
merger, sale, lease or conveyance by a holder of the number of shares of Common
Stock into which such Security might have been converted immediately prior to
such consolidation, merger, sale, lease or conveyance.
(b) In case of any reclassification or change of the shares of Common Stock
issuable upon conversion of the Securities (other than a change in par value, or
from par value to no par value, or as a result of a subdivision or combination,
but including any change in the shares of Common Stock into two or more classes
or series of shares) or in the case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change in the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from par value to no par value, or as a result of
a subdivision or combination, but including any change in the shares of Common
Stock into two or more classes or series of shares), or any reorganization
within the meaning of Section 368 (a) (1) (B) of the Internal Revenue Code of
1986, as amended, the Company and the person obligated to deliver stock, other
securities, property or cash (or any combination thereof) upon the effectiveness
of such reorganization and the issuer of any stock or other securities so to be
delivered, if a different person, shall execute a supplemental debenture
providing that the Holder of each Security then outstanding shall have the right
thereafter to convert such Security solely into the kind and amount of shares of
stock, other securities, property or cash or any combination thereof receivable
upon such classification, change, consolidation or merger by a holder of the
number of shares of Common Stock into which such Security might have been
converted immediately prior to such reclassification, change, consolidation or
merger.
(c) Any supplemental debenture entered into pursuant to this Section shall (i)
where appropriate, state the Conversion Price in terms of one full share of
Common Stock or one full share of the Common Stock of any successor, leasing,
purchasing or affiliate corporation (as the case may be) and (ii) provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. The Company shall cause notice of the
execution of each such supplemental debenture to be mailed to each Holder of
Securities at his address as the same appears in the Security register.
12. AMENDMENT, SUPPLEMENT, WAIVER.
Subject to certain exceptions contained herein, the Notes may not be
amended or supplemented without unanimous consent of the Holders of the Notes
then outstanding. Any such consent by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note. Without the consent of any holder of a Note, the Company
may amend or supplement the Indenture or the Notes to cure any ambiguity, defect
or inconsistency or to provide for uncertificated Notes in addition to or in
place of certified Notes or to make any change that does not materially
adversely affect the rights of any Holder of a Note
13. SENIOR NOTES.
The 7% Convertible Debentures Due 2003 shall be senior in all rights,
including but not limited to payment of principal and interest, to all other
debentures whether outstanding as of this date or issued in the future. This
senior right shall only apply to debentures issued by the Company and shall not
apply to secured debt nor general unsecured debt of the Company such as accounts
payable, bank lines of credit, or credit card debt.
14. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note or an
assignee, such as TEN COM (=tenants in common) TENANT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=Custodian) and U/G/M/A (=Uniform Gifts to Minors
Act).
