Exhibit 10.15
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS. NO INTEREST IN THIS NOTE MAY
BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE ACT WHERE THE
HOLDER HAS FURNISHED TO THE COMPANY AN OPINION OF ITS COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS
AVAILABLE
XXXXXX TECHNOLOGIES, INC.
10% SUBORDINATED CONVERTIBLE NOTE
$_________________ December 20, 2002
Pearl River, New York
MAKER'S PROMISE TO PAY
FOR VALUE RECEIVED, Xxxxxx Technologies, Inc., a New York Corporation
having its principal offices located at 000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx Xxxxx,
Xxx Xxxx (the "Maker") promises to pay, subject to the Conditions to Repayment
as set forth below, to the order of __________________________________ (the
"Payee") having an address at ________________, at Xxxxx's address set forth
above (or at such other place as the holder of this Note may from time to time
direct by notice in writing to Maker), the principal sum of
______________________________($00.00) Dollars in such coin or currency of the
United States as shall at the time be legal tender for the payment of public and
private debts, on December , 2004 (the "Maturity Date") as evidenced by this
instrument (the "Note"). The Payee, assignee or anyone entitled to receive
payments under this Note shall be hereinafter referred to as the "Note Holder".
INTEREST
Interest will be charged on the outstanding principal of this Note from
time to time until the full amount of principal has been paid, at an annual rate
of ten (10.00%) percent (the "Note Rate").
PAYMENTS
Subject to the Conditions to Repayment set forth below, interest accrued on the
outstanding principal amount of this Note shall be payable quarterly, in
arrears, on each of April 1, July 1, October 1, and January 1, (each an
"Interest Payment Date"), commencing on April 1, 2003. Payments shall be deemed
timely if made within fifteen (15) days of the Interest Payment Date. The
remainder accrued interest shall be payable in full on the earlier to occur of
(i) the Maturity Date and (ii) the date of the occurrence of an Event of Default
hereunder.
[Interest accrued on the outstanding principal amount of this Note shall
otherwise be payable quarterly in arrears on each of April 1, July 1, October 1,
2003 and January 1, (each an "Interest Payment Date"). Xxxxx however has elected
to defer the payments of interest accruing on the outstanding principal of this
Note until the Maturity Date of the Note and all such deferred interest will be
added to the unpaid principal amount of the Note on each Interest Payment Date
and will accrue interest at the Note Rate.]
Interest shall accrue on past due principal and accrued and unpaid interest
(other than with respect to interest payments made within the grace period after
an Interest Payment Date as noted above in paragraph a) at the annual rate of
fifteen (15%) percent (the "Default Rate"). Notwithstanding anything to the
contrary contained in this Note, Maker shall not be obligated to pay, and the
Payee shall not be entitled to charge, collect or receive, interest in excess of
the maximum rate allowed by applicable law. During any period of time in which
the interest rate specified herein exceeds such maximum rate, interest shall
accrue and be payable at such maximum rate. Any amounts of interest collected by
Payee in excess of such maximum rate shall be deemed to apply to principal and
all payments of interest and principal shall be recalculated to allow for such
characterization.
All payments received on account of this Note shall be applied first to the
payment of accrued interest on this Note and then to the reduction of the unpaid
principal balance of this Note. Interest, whether at the Note Rate or the
Default Rate, shall be computed on the basis of a year of 360 days, for the
actual number of days elapsed.
[Other than with respect to the deferred quarterly interest payments], In the
event that the date for payment of any amount payable under this Note falls due
on a Saturday, Sunday or public holiday under the laws of the State of New York,
then such payment shall be made on the first business day following the date on
which such payment shall have so fallen due, without any interest or other
payment in respect of such delay, with the same force and effect as if made on
the date payment had originally fallen due.
MAKER'S RIGHT TO PREPAY
Subject to the Conditions to Repayment set forth below, upon twenty (20) days
prior written notice, Maker has the right to prepay, only in shares of common
stock, par value $.01 per share ("Common Stock") of the Maker based upon the
Conversion Rate (as defined below) of the Notes then in effect, all or any
portion of this Note without the consent of the holder and without a prepayment
penalty.
Any partial prepayment shall be first applied to all accrued and unpaid interest
outstanding as of the date of the prepayment before applying any prepayment to
reduce the outstanding principal amount of the Note.
CONDITIONS TO REPAYMENT
Until all Obligations under the Loan Agreement dated as of April 29, 1998 (the
Loan Agreement), between The CIT Group/Business Credit, Inc. ("CIT Group") and
Xxxxxx Technologies Company ("Xxxxxx"), a wholly-owned subsidiary of the Maker,
are fully and finally paid and satisfied, the Maker shall not pay in cash any
principal or interest outstanding under this Note, including any cash prepayment
of principal or interest. For purposes of this Section 5, the term "Obligations"
means all revolving credit facilities, term loans, loans made for the purpose of
financing capital expenditures and accommodations including, without limitation,
letters of credit, bankers' acceptances, merchandise purchase guarantees or
other guarantees or indemnities for Xxxxxx'x account, currently outstanding or
hereinafter incurred and made or extended to Xxxxxx by CIT Group and evidenced
by the Loan Agreement.
Notwithstanding anything to the contrary set forth in paragraph 5.1 above, the
Maker may make:
cash payments of interest on each Interest Payment Date provided that: (i) no
event of default under the Loan Agreement shall then exist or have occurred and
be continuing which event of default shall not have been cured by Xxxxxx or
Maker or waived by CIT Group, and (ii) the aggregate amount of such payments of
interest by the Maker to the holders of notes of the series of which this Note
forms a part (the "Convertible Notes" which includes the convertible promissory
notes ("Exchange Notes") issued in exchange ("Note Exchange") for the Maker's
bridge notes and which Exchange Notes are identical in terms to the Convertible
Notes), shall not exceed $20,000 in any calendar year; and
cash payments of principal on the Maturity Date provided that: (i) no event of
default under the Loan Agreement shall then exist or have occurred and be
continuing, which event of default shall not have been cured by Xxxxxx or Maker
or waived by CIT Group, and (ii) immediately after giving effect to any such
payment of principal and to any related payment or funding by Xxxxxx to Maker,
Xxxxxx having net availability (as such term is defined in the Loan Agreement)
of not less than $200,000 and combined net availability and cash balances of not
less then $850,000.
In the event that the cash payment of interest to Note Holders on any Interest
Payment Date shall exceed the maximum allowable pursuant to Section 5.2(a)
above, such cash payment of interest shall be made on a pro rata basis among the
Note Holders entitled to such interest payment based upon the percentage of each
such Note Holder's aggregate principal and accrued interest as of such Interest
Payment Date, against the aggregate principal amount and accrued interest under
the Notes held by the Note Holders entitled to such interest payment as of the
Interest Payment Date; and the balance of any such interest payment to each Note
Holder entitled thereto shall be added to principal amount of such Note Holder's
Note on the Interest Payment Date and shall accrue interest at the Note Rate.
This note is subject to the terms of a separate written consent by and between,
among others, maker, Xxxxxx Technologies Company, CIT Group and Payee.
MAKER'S FAILURE TO PAY AS REQUIRED
Not in limitation of any other right at law or in equity, upon the
occurrence of any of the following events of default (each, an "Event of
Default"), the unpaid principal amount of this Note shall become immediately due
and payable by the Maker, together with the interest accrued thereon, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Maker:
Other than as a result of the restrictions set forth in Section 5 above, the
Maker's failure to make any payment of principal and/or interest due under this
Note on the date the same is due;
Other than as a result of the restrictions set forth in Section 5 above, the
Maker's failure to keep and perform all promises, agreements, conditions and
provisions of this Note, which, if such default does not involve the payment of
money, is not cured within ten days;
The Maker makes a general assignment for the benefit of creditors; or files a
voluntary petition in bankruptcy, or a petition for reorganization, arrangement,
composition, readjustment or similar relief under any present or future statute,
law or regulation, or shall file an answer admitting or not contesting the
material allegations of a petition against it in any such proceeding; or admits
in writing its inability to pay its debts as they become due; or permits an
attachment to be made on any substantial part of Maker's property or assets; or
if an involuntary petition in bankruptcy is filed against any obligor and not
dismissed within sixty (60) days; or if a receiver or trustee is appointed for
all or any part of the property and assets of any obligor.
Upon any such Event of Default, Maker will be liable to the Note Holder
for interest at the Default Rate from the date of such Event of Default,
together with all reasonable expenses incurred by the Note Holder in the
collection of this indebtedness resulting from such Event of Default, including,
without limitation, the Note Holder's reasonable fees for one attorney of its
choice for representation of the Note Holder in connection with the collection
of such indebtedness.
REQUIRED NOTICES
Unless applicable law requires a different method, any notice required to
be given to any of the parties hereto shall be in writing and shall be deemed to
have been sufficiently given by delivering it or by mailing it by first class
mail to such party at the address set forth above or any alternate address as
provided by such party in writing.
CONVERSION
The Note Holder, at his or its option, is entitled, upon but not prior to the
first anniversary of the date of this Note and at any time prior to the payment
in full of the principal amount of this Note by the Maker, to convert all of the
principal amount of this Note at the time outstanding or any portion thereof,
together with accrued but unpaid interest thereon, into shares ("Conversion
Shares") of Common Stock at an initial conversion price equal to the average
closing price of the Maker's Common Stock as reported on the Nasdaq Small
Cap Market for the five business days preceding the date of this Note, which
shall be subject to adjustment from time to time pursuant to this Section 8
("Conversion Rate").
Conversion of this Note, and accrued and unpaid interest thereon, may be
effected by the Note Holder transmitting to the Maker, at its principal office
by facsimile transmission, a written notice (a "Conversion Notice") stating the
principal amount of the Note the Note Holder elects to convert in accordance
with the provisions of this Section 8.2 and specifying the name or names in
which such Note Holder wishes the certificate or certificates for Conversion
Shares to be issued and by delivering to the Maker, at such principal office
within ten (10) business days thereafter, the original Conversion Notice and
this Note by express courier. In case the Conversion Notice specifies a name or
names other than that of the Note Holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issuance of Conversion Shares in
such other name or names. Other than such taxes, the Maker will pay any and all
issue and other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of Conversion Shares pursuant hereto. As
promptly as practicable, and in any event within five (5) business days after
the date of the receipt by the Maker of this Note or Notes and the receipt of
the original Conversion Notice relating thereto (the "Delivery Date") and, if
applicable, payment of all transfer taxes (or the demonstration to the
satisfaction of the Maker that such taxes have been paid), the Maker shall
deliver or cause to be delivered to Note Holder, by express courier,
certificates representing the number of validly issued, fully paid and
nonassessable full Conversion Shares to which the Note Holder shall be entitled.
Such conversion shall be deemed to have been made at the close of business on
the date of receipt by the Maker of a Conversion Notice by facsimile
transmission as permitted by this provisions of this Section 8.2, so that the
rights of the Note Holder under this Note shall cease, except for the right to
receive Conversion Shares with respect to the principal amount and accrued
unpaid interest thereon so converted and a new Note for any principal amount
remaining unpaid, and the person entitled to receive such Conversion Shares
shall be treated for all purposes as having become the record holder of such
Conversion Shares at such time, provided that if this Note and the original
Conversion Notice are not received by the Maker within ten (10) business days
after the Maker's receipt of a Conversion Notice by facsimile transmission, the
rights of the Note Holder under this Note (to the extent converted) will cease
at the close of business on the day the Maker actually receives the original
Note and the original Conversion Notice pertaining thereto.
Notwithstanding any contrary provision contained herein, at any time prior to
the first anniversary of this Note, all of the outstanding principal and accrued
interest of the Note shall either (i) be applied to the purchase of securities
to be offered by the Maker at the public offering purchase price, in any public
offering by the Maker of equity securities which, when aggregating the
outstanding principal and accrued interest of the Convertible Notes and all
additional proceeds from new investors, equals not less than $2,000,000 (the
"Equity Offering"), or (ii) in the event of such Equity Offering, be converted
into Conversion Shares at the then-effective Conversion Rate. The Note Holder
will have the right to determine, to the extent that securities are available
for purchase in the Equity Offering, whether to apply the outstanding principal
and interest, if any, of this Note to the purchase of the securities in the
Equity Offering or to convert the same into Conversion Shares at the
then-effective Conversion Rate; provided, however, that in the event that all or
a portion of outstanding principal and interest, if any, of this Note exceeds
the number of equity securities available in the Equity Offering, the balance of
this Note not applied to the purchase of equity securities will be converted
into Conversion Shares at the then-effective Conversion Rate.
Upon conversion, the Note Holder shall be entitled at the Note Holder's option,
to receive any accrued and unpaid interest on the principal amount of this Note
converted, to the date of such conversion, in the form of Conversion Shares.
In connection with the conversion of this Note, no fractional amount of
Conversion Shares shall be issued, but, in lieu thereof, the Maker shall round
such fractional amount to the nearest whole Conversion Share.
The Maker shall at all times reserve and keep available for issuance upon the
conversion of this Note, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
this Note in full, and shall take all action required to increase the authorized
number of shares of Common Stock if necessary to permit the conversion of this
Note in full.
o Except with respect to the securities set forth in paragraph (b) below, in
case the Maker shall at any time after the date hereof issue or sell any shares
of Common Stock, including shares held in the Maker's treasury, or shall issue
any options, rights or warrants to subscribe for shares of Common Stock or other
equity or debt securities exercisable into or exchangeable for shares of Common
Stock (each, an "Additional Issuance"), for a consideration per share less than
the Conversion Rate then in effect, the Conversion Rate shall be adjusted
immediately thereafter such that it shall equal the consideration per share
received by the Maker for the securities issued in such Additional Issuance.
Such adjustment shall be made successively whenever such an Additional Issuance
is made for consideration per share below the Conversion Rate then in effect.
The adjustment of the Conversion Rate set forth in paragraph (a) above shall not
apply to options granted by the Maker pursuant to stockholder-approved option
plans of the Maker nor to the issuance of Common Stock upon exercise of such
options or upon the exercise of options, warrants or other securities
exercisable for or exchangeable into Common Stock outstanding immediately prior
to the date of this Note or the conversion of convertible debt of the Maker
outstanding immediately prior to the date of this Note.
o In the event that, at any time and from time to time, the Maker shall issue
additional shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) in a stock dividend, stock distribution, or
subdivision paid with respect to Common Stock, or declare any dividend or other
distribution payable with additional shares of Common Stock (or securities
convertible into or exchangeable for Common Stock) with respect to Common Stock,
or effect a split or subdivision of the outstanding shares of Common Stock, the
Conversion Rate shall, concurrently with the effectiveness of such stock
dividend, stock distribution, or subdivision, or the earlier declaration
thereof, be proportionately decreased, and the number of shares of Common Stock
issuable upon conversion of this Note shall be proportionately adjusted such
that, to avoid dilution of the Note Holder's position, the Note Holder
shall thereafter be entitled to receive on conversion of this Note an additional
number of shares of Common Stock which such Note Holder would received upon or
by reason of any of the events described above, had this Note been converted
immediately prior to the occurrence of such event.
In the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of shares
of Common Stock, the Conversion Rate shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased and the
number of shares of Common Stock issuable upon conversion of this Note shall be
proportionately adjusted so that the Note Holder shall be entitled to receive
upon conversion of this Note, the aggregate number of shares of Common Stock
which such Note Holder would have been entitled to receive if this Note had been
converted immediately prior to the occurrence of such combination or
consolidation.
In case of any consolidation or merger of the Maker with or into another
corporation or entity in which the Maker is not the surviving or resulting
company, or in case of any sale or conveyance to another company or entity of
all or substantially all of the assets of the Maker (each of the foregoing being
referred to as a "Transaction"), this Note shall thereafter be convertible into,
in lieu of Common Stock issuable upon such conversion prior to consummation of
such Transaction, the kind and amount of shares of stock and other securities
and/or property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares of Common Stock into which this
Note was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common Stock
in any tender or exchange offer that is a step in such Transaction). In case
securities or property other than Common Stock shall be issuable or deliverable
upon conversion as aforesaid, then all references in this Section 8 shall be
deemed to apply, so far as appropriate and nearly as may be, to such other
securities or property.
For the purposes of any computation to be made in accordance with this Section,
the following provisions shall be applicable: (a) in case of the issuance or
sale of shares of Common Stock for a consideration part or all of which shall be
cash, the amount of the cash consideration therefor shall be deemed to be the
amount of cash received by the Maker for such shares (or, if shares of Common
Stock are offered by the Maker for subscription, the subscription price); (b) in
case of the issuance or sale (otherwise than as a dividend or other distribution
on any stock of the Maker) of shares of Common Stock for a consideration part or
all of which shall be other than cash, the amount of the consideration therefor
other than cash shall be deemed to be the value of such consideration as
determined in good faith by the Board of Directors of the Maker; (c) shares of
Common Stock issuable by way of dividend or other distribution on any stock of
the Maker shall be deemed to have been issued immediately after the opening of
business on the day following the record date for the determination of
shareholders entitled to receive such dividend or other distribution and shall
be deemed to have been issued without consideration; (d) the reclassification of
securities of the Maker other than shares of Common Stock into securities
including shares of Common Stock shall be deemed to involve the issuance of such
shares of Common Stock for a consideration other than cash immediately prior to
the close of business on the date fixed for the determination of security
holders entitled to receive such shares, and the value of the consideration
allocable to such shares of Common Stock shall be determined as provided above;
and (e) the number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
The Maker shall not, by amendment of its Articles of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Maker but will at all times in good faith assist in
the carrying out of all the provisions of this Section 8 and in the taking of
all such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Convertible Notes against impairment.
Upon the occurrence of each adjustment to the Conversion Rate pursuant to this
Section 8, the Maker, at its expense, shall cause its independent auditors to
promptly compute such adjustment in accordance with the terms hereof and furnish
to each holder of Convertible Notes a certificate of such auditors setting forth
such adjustment and showing in detail the facts upon which such adjustment is
based.
The Maker shall mail to each holder of Convertible Notes at their addresses as
shown on the records of the Maker, as promptly as possible, but in any event not
fewer than 15 days prior to the applicable record date, a notice stating (i) the
date on which any merger, consolidation, recapitalization, or reorganization of
the Maker, or sale of all or substantially all of the Maker's assets, or any
other similar transaction or any corporate transaction requiring the vote of the
stockholders of the Maker, (ii) the record date therefor, and (iii) the
consideration (by class and series) to be paid to holders of capital stock of
the Maker upon consummation thereof.
ISSUANCE OF WARRANTS
On the earlier of (a) December 20, 2003, or (b) the consummation by the
Maker of an Equity Offering described in Section 8.3 above, the Maker will issue
to the Note Holder Common Stock purchase warrants (the "Convertible Note
Warrants") to purchase an aggregate number of shares of Common Stock equal to
10% of the number of shares of Common Stock into which this Note is convertible
at December 20, 2002. Each Convertible Note Warrant will be exercisable to
purchase one share of Common Stock for a period of five years from issuance at
an exercise price (the "Exercise Price") equal to 110% of the lesser of (i) the
Conversion Rate of this Note as of December 20, 2002, or (ii) the Conversion
Rate of this Note on the date of issuance of the Convertible Note Warrants. The
Exercise Price of the Convertible Note Warrants will be subject to anti-dilution
adjustment on terms substantially similar to the anti-dilution adjustment of the
Conversion Rate of this Note set forth in Section 8 above.
MISCELLANEOUS
No delay or omission by the Note Holder in exercising any right or power
hereunder shall operate as a waiver of such right or power, and a waiver on one
occasion shall not be construed as a waiver or a bar to the exercise of any
right on any other occasion.
The rights and remedies of the Note Holder as provided in this Note shall be
cumulative and concurrent, and may be pursued singly, successively, or together
at the sole discretion of the Note Holder. The failure to exercise any such
right or remedy shall in no event be construed as a waiver or release of said
rights or remedies or of the right to exercise them at any time later.
None of the terms and conditions of this Note may be amended, modified or waived
orally, but only in a writing signed by the Maker and the Note Holder.
This Note shall be governed by, and construed in accordance with, the domestic
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
If any term or provision of this Note shall be held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof shall in no
way be affected hereby.
This Note shall be binding upon the Maker and the Maker's successors and
assigns; provided that the Maker may not assign this Note without the Note
Holder's consent.
WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED.
XXXXXX TECHNOLOGIES, INC., Maker
By:
-----------------------------------
BLANK ROME XXXXXX XXXXXXXXXX LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
