Exhibit 4.2
Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and schedules to this
agreement have been omitted. Axeda Systems Inc. agrees to supplementally furnish
such exhibits and schedules upon request from the Securities and Exchange
Commission.
THIS NOTE AND THE COMMON SHARES 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 SHARES 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 AXEDA SYSTEMS INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, AXEDA SYSTEMS INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o 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 "Holder") or
its registered assigns or successors in interest, on order, the sum of Four
Million Five Hundred Thousand Dollars ($4,500,000), together with any accrued
and unpaid interest hereon, on October 5, 2007 (the "Maturity Date") if not
sooner paid.
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 Borrower and the Holder (as amended, modified or
supplemented from time to time, the "Purchase Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1(a) Interest Rate. Subject to Sections 4.11 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 percent (2.00%). The prime 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. Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears,
commencing on November 1, 2004 and on the first business day of each consecutive
calendar month thereafter until the Maturity Date (and on the Maturity Date),
whether by acceleration or otherwise (each, a "Repayment Date").
1.1 (b) Interest Rate Adjustment. The Interest Rate shall be calculated on the
last business day of each month hereafter until the Maturity Date (each a
"Determination Date") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's Common Stock
underlying each of the conversion of the Note and that certain
1
warrant issued to Holder on a registration statement declared effective by the
Securities and Exchange Commission (the "SEC"), and (ii) 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) trading days immediately
preceding a 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 100 basis points
(100 b.p.) (1.00%) 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
aggregate principal amount outstanding under this Note at any time (the
"Principal Amount") shall begin on May 1, 2005 and shall recur on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an "Amortization Date"). Subject to Article 3 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $150,000, together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other amounts which are then owing under this Note, the Purchase Agreement
or any other Related Agreement but have not been paid (collectively, the
"Monthly Amount"). Any Principal Amount that remains outstanding on the Maturity
Date 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 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
Borrower shall pay the Holder an amount equal to one hundred and two percent
102% of the Monthly Amount due and owing to the Holder 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 Borrower to the
Holder on such Repayment Date (in respect of such portion of the Monthly Amount
converted into 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 $0.48.
(b) Monthly Amount Conversion Guidelines. Subject to Sections 2.1(a), 2.2,
and 3.2
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hereof, the Holder shall convert into shares of Common Stock all or a portion of
the Monthly Amount due on each Repayment Date according to the following
guidelines (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) trading days immediately preceding such Repayment 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 ten (10) day trading period
immediately preceding the applicable Repayment Date. If the Conversion Criteria
are not met, the Holder 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 Holder has not been able to convert into shares of Common Stock
due to failure to meet the Conversion Criteria, shall be paid by the Borrower in
cash at the rate of 102% of the Monthly Amount otherwise due on such Repayment
Date, within three (3) business days of the applicable Repayment Date.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, none of the Borrower's obligations to the Holder may be converted into
Common Stock unless (i) either (x) an effective current Registration Statement
(as defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued in connection with satisfaction of such obligations exists or
(y) an exemption from registration of the Common Stock is available to pursuant
to Rule 144 of the Securities Act and (ii) 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 Holder in whole or in part
at the Holder's option.
2.3 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note ("Optional Redemption") by paying to the Holder a sum of
money equal to (i) one hundred twenty percent (120%) of the principal amount of
this Note to be prepaid together with accrued but unpaid interest thereon and if
this Note is prepaid in full, any and all other sums due, accrued or payable to
the Holder arising under this Note, the Purchase Agreement, or any Related
Agreement if such prepayment is made on or before October 5, 2006 or (ii) one
hundred fifteen percent (115%) of the principal amount of this Note to be
prepaid together with accrued but unpaid interest thereon and if this Note is
prepaid in full, any and all other sums due, accrued or payable to the Holder
arising under this Note, the Purchase Agreement, or any Related Agreement if
such prepayment is made after October 5, 2006 (each of 2.3(i) and 2.3(ii), as
applicable, being referred to herein as the "Redemption Amount") outstanding on
the day written notice of redemption (the "Notice of Redemption") is given to
the Holder. The Notice of Redemption shall specify the date for such Optional
Redemption (the "Redemption Payment Date") which date shall be seven (7)
business days after the date of the Notice of Redemption (the "Redemption
Period"). A Notice of Redemption shall not be effective with respect to any
portion of this Note for which the Holder has a pending election to convert
pursuant to Section 3.1, or for conversions initiated or made by the Holder
pursuant to Section 3.1 during the Redemption Period. The Redemption Amount
shall be determined as if such Holder's conversion elections had been completed
immediately prior to the
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date of the Notice of Redemption. On the Redemption Payment Date, the Redemption
Amount must be paid in good funds to the Holder. In the event the Borrower fails
to pay the Redemption Amount on the Redemption Payment Date as set forth herein,
then such Redemption Notice and the Borrower's obligation to pay such stated
Redemption Amount will be null and void.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. The Holder shall have the right, but not
the obligation, to convert all or any portion of the then aggregate outstanding
principal amount of this Note, 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 Holder may exercise such right by delivery to the Borrower of a
written notice of conversion not less than one (1) day prior to the date upon
which such conversion shall occur.
3.2 Conversion Limitation. Notwithstanding anything contained herein to the
contrary, the Holder shall not be entitled to convert pursuant to the terms of
this Note an amount that would be convertible into that number of shares of
Common Stock which, when added to the number of shares of Common Stock otherwise
beneficially owned by such Holder including those issuable upon exercise of
warrants held by such Holder would exceed 4.99% of the outstanding shares of
Common Stock of the Borrower at the time of conversion. 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 conversion limitation described in the first sentence of this
Section 3.2 shall automatically become null and void without any notice to
Borrower upon the occurrence and during the continuance beyond any applicable
grace period of an Event of Default, or upon 75 days prior notice to the
Borrower. Notwithstanding anything contained herein to the contrary, the number
of shares of Common Stock issuable by the Company and acquirable by the Holder
pursuant to the terms of this Note, the Purchase Agreement, the Warrant (as
defined in the Purchase Agreement) or any Related Agreement (as defined in the
Purchase Agreement) at a weighted average issue price of below $0.47 taking into
account all such issuances, shall not exceed an aggregate of 6,491,440 shares of
the Company's Common Stock (subject to appropriate adjustment for stock splits,
stock dividends, or other similar recapitalizations affecting the Common Stock)
(the "Maximum Common Stock Issuance"), unless the issuance of shares hereunder
in excess of the Maximum Common Stock Issuance shall first be approved by the
Company's shareholders. If at any point in time and from time to time the number
of shares of Common Stock issued pursuant to the terms of this Note, the
Purchase Agreement, the Warrant or any Related Agreement, together with the
number of shares of Common Stock that would then be issuable by the Borrower to
the Holder in the event of a conversion or exercise pursuant to the terms of
this Note, the Purchase Agreement, the Warrant or any Related Agreement, would
exceed the Maximum Common Stock Issuance but for this Section 3.2, the Borrower
shall promptly call a shareholders meeting to solicit shareholder approval for
the issuance of the shares of Common Stock hereunder in excess of the Maximum
Common Stock Issuance. Notwithstanding anything contained herein to the
contrary, from the date hereof until such time as the Borrower's shareholders
have approved an
4
increase in the number of authorized shares of Common Stock, the number of
shares of Common Stock issuable by the Borrower pursuant to the term of this
Note or any Related Agreement shall not exceed an aggregate of 8,202,012 shares
of Common Stock (subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations affecting the Common Stock). The
Borrower shall promptly after the date hereof call a shareholders meeting to
solicit shareholder approval of an increase in its authorized number of shares
of Common Stock.
3.3 Mechanics of Holder's Conversion. (a) In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion
("Notice of Conversion") to the Borrower and such 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 Holder 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 Borrower
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a Conversion Date (the "Conversion
Date"). A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.
(b) Pursuant to the terms of the Notice of Conversion, the Borrower will
issue instructions to the transfer agent accompanied by an opinion of counsel
promptly following the date of the delivery to Borrower of the Notice of
Conversion and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder'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 Borrower 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 Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such Common
Stock, unless the Holder provides the Borrower 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 shall be determined by dividing that portion of the principal and
interest and fees to be converted, if any, by the then applicable Fixed
Conversion Price. In the event of any conversions of outstanding principal
amount under this Note in part pursuant to this Article III, such conversions
shall be deemed to constitute conversions of outstanding principal amount
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.
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(b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is 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. Except as provided in Section 3.2 hereof, during the period the
conversion right exists, the Borrower 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 Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower 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
Borrower 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 Holder (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
Holder in writing; (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified and non-qualified stock
option plan adopted by the Borrower) or (iv) the issuance of 500,000 shares of
Common Stock (subject to appropriate adjustment for stock splits, stock
dividends or other similar recapitalizations affecting the Common Stock) all of
which are unregistered, as compensation for professional services rendered by
consultants and other service providers of the Borrower) 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 pursuant to the formula below. For purposes hereof, the issuance of any
security of the Borrower 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.
If the Borrower issues any additional shares pursuant to Section 3.4 above
then, and thereafter successively upon each such issue, the Fixed Conversion
Price shall be adjusted by multiplying the then applicable Fixed Conversion
Price by the following fraction:
6
A + B
------------------------------
(A + B) + [((C - D) x B) / C]
A = Total amount of shares of Common Stock convertible pursuant to this
Note .
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
D. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, 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 New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. Subject
to the provisions of Article IV, the Borrower will pay no costs, fees or any
other consideration to the Holder for the production and issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder 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 Holder shall be one hundred twenty percent (120%), or if
after October 5, 2006, one hundred fifteen (115%) of the outstanding principal
amount of the Note (plus 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 Holder pursuant to the Note 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 and continuance beyond any applicable grace period 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. The Borrower fails to
pay when due any installment of principal, interest or other fees hereon in
accordance herewith, or the Borrower
7
fails to pay when due any amount due under any other promissory note issued by
Borrower to the Holder, and in any such case, such failure shall continue for a
period of three (3) business days following the date upon which any such payment
was due.
4.2 Breach of Covenant. The Borrower breaches any covenant or any other
term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any
other term or condition of any Related Agreement in any material respect and, in
any such case, such breach, if subject to cure, continues for a period of
fifteen (15) business days after the occurrence thereof.
4.3 Breach of Representations and Warranties. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in 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, and if subject to cure,
shall not be cured for a period of thirty (30) days after the occurrence
thereof.
4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries 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 Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $100,000 (to the extent not
covered by insurance), and shall remain unvacated, unbonded or unstayed for a
period of sixty (60) 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 or against the Borrower or any
of its Subsidiaries and if commenced against Borrower or any such Subsidiary,
shall not be dismissed within sixty (60) 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
Borrower 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, or any securities exchange or other
securities market on which the Common Stock is then being listed or traded.
4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower shall
fail (i) to timely deliver Common Stock to the Holder pursuant to and in the
form required by this Note, and
8
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 Holder 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.
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).
DEFAULT RELATED PROVISIONS
4.11 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Borrower shall pay 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 interest from the date of such Event of Default until
the date such Event of Default is cured or waived or no longer continuing. When
interest accrues under this Section 4.11, no interest shall accrue under Section
1.1(a) hereof.
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 Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2 Notices. 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
9
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 Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, 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 Borrower or the Holder 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 Borrower 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 Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder. No transfer or assignment of an
interest in this Note or any right to receive payments under this Note shall be
effective until Borrower shall have: (i) received from the new holder, (a) a
certification that it is not a person described in Internal Revenue Code Section
881(c)(3), and (b) a completed IRS Form W-8BEN (or substantially similar form
signed under penalty of perjury) providing the name and address of the new
holder; and (ii) registered the transfer on its books and records.
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 and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. 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 Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
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
10
applicable law. In the event that the rate of interest required to be paid or
other charges hereunder exceed the maximum permitted by such law, any payments
in excess of such maximum shall be credited against amounts owed by the Borrower
to the Holder and thus refunded to the Borrower.
5.7 Security Interest and Guarantee. The Holder has been granted a security
interest (i) in certain assets of the Borrower and its Subsidiaries as more
fully described in the Master Security Agreement dated as of the date hereof and
(ii) pursuant to the Stock Pledge Agreement dated as of the date hereof. The
obligations of the Borrower under this Note are guaranteed by certain
Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated as of the
date hereof.
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
Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its
name effective as of this 5th day of October, 2004.
AXEDA SYSTEMS INC.
By: /s/ Xxxxxx X. Xxxxxxx Xx.
-------------------------------
Name: Xxxxxx X. Xxxxxxx Xx.
----------------------
Title: Chief Executive Officer
-----------------------
WITNESS:
/s/ Xxxxx Xxxxxx
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