Exhibit 99.2
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NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK INTO WHICH IT IS CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATES
SECURITIES LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THIS NOTE MAY
CONSTITUTE A "SECURITY" FOR THE PURPOSES OF SUCH LAWS, AND, AS SUCH, MAY NOT BE
FURTHER SOLD OR TRANSFERRED BY THE HOLDER IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION THEREUNDER APPLICABLE TO SUCH SALE
OR TRANSFER.
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FORM OF CONVERTIBLE NOTE
EPICEDGE, INC.
AMOUNT
DATE:
FOR VALUE RECEIVED, EpicEdge, Inc., a Texas corporation (the
"Company"), promises to pay to the registered holder,______ , its successors and
assigns (in each case, "Payee"), the sum of __________($ ), plus interest at the
rate of eight percent (8%) per annum accruing from the date hereof on the unpaid
indebtedness hereof until finally paid. Such principal and accrued interest
shall be paid by the Company in lawful money of the United States of America, at
the Company's offices in Houston, Texas, or at such other place as may be
designated in writing by the Company to Payee as follows:
(a) Accrued and unpaid interest hereunder shall be payable in
cash upon maturity or in shares of the Company's Common Stock upon conversion as
provided in SECTION 3.
(b) All outstanding principal and unpaid accrued interest
shall be finally due and payable on December 1, 2001 (the "Maturity Date")
unless otherwise pre-paid pursuant to SECTION 1.
1. PREPAYMENT; DEMAND FOR PREPAYMENT.
(a) The principal or interest hereunder may be prepaid at any
time without penalty or premium; PROVIDED, HOWEVER, that the Company shall
provide at least (10) days prior written notice to Payee, and Payee may elect to
exercise its conversion rights hereunder with respect to the indebtedness to be
prepaid prior to receipt of such prepayment.
(b) In the event the Company consummates the sale of its
subsidiary, IPS Associates, Inc. ("IPS"), Payee may make demand (the "Demand")
upon the Company for pre-
payment in full of the outstanding amounts due hereunder; PROVIDED, HOWEVER,
that Payee must make such Demand within thirty (30) days of the consummation of
the sale by the Company of IPS.
2. DEFAULT. In the event of (i) any failure by the Company to make any
payment of principal or interest hereunder within ten (10) days after written
notice of default in such payment from Payee has been received by the Company,
(ii) the filing of a petition by or against the Company under the provisions of
any state insolvency law or under the provisions of the Federal Bankruptcy Act
(for bankruptcy or reorganization or other relief), or (iii) any assignment by
the Company for the benefit of its creditors, Payee may, at Payee's option,
declare the entire unpaid balance hereof immediately due and payable. Any delay
on the part of Payee in exercising any rights hereunder shall not operate as a
waiver of such rights; acceptance of any payment after its due date shall not be
deemed a waiver of the right to require prompt payment when due of all other
sums; and acceptance of any payment after Payee has declared the entire
indebtedness due and payable shall not cure any default of the Company or
operate as a waiver of any rights of Payee hereunder. Upon default, the Company
agrees to pay all costs and reasonable actual attorneys' fees for collection of
this debt instrument.
3. CONVERSION RIGHTS.
(a) TERMS. Payee shall have the right from time to time to
convert (the "Conversion Right") any or all of the unpaid indebtedness hereof
(including accrued but unpaid interest) into shares of the Company's common
stock, par value $.01 (the "Common Stock"), at a conversion rate of fifty cents
($0.50) of indebtedness per share of Common Stock (the "Conversion Rate"). Such
Conversion Right may be exercised at any time prior to the Maturity Date. To
effect such conversion, Payee must tender to the Company at its offices in
Houston, Texas, this Note together with a written notice of exercise of such
Conversion Right stating the amount of indebtedness being converted. Upon the
giving of the notice of conversion and receipt of this Note as hereinabove
provided, no further interest shall accrue upon the converted indebtedness
hereof, and the Company shall issue to Payee a certificate evidencing the shares
of Common Stock to which Payee is entitled in proper form. The Company will pay
any documentary stamp taxes attributable to the initial issuance of shares of
its Common Stock upon conversion of any indebtedness represented hereby.
(b) ADJUSTMENTS. In the event of any stock dividend, split,
combination or reclassification directly affecting the then outstanding Common
Stock, the then effective Conversion Rate at which the indebtedness evidenced by
this Note may be converted into shares of Common Stock shall be proportionately
adjusted, upward or downward, to prevent dilution or enlargement of the rights
of Payee, effective at the close of business on the date of such dividend,
split, combination or reclassification. In the event the Common Stock shall be
changed into another kind of capital stock or debt (otherwise then through a
stock dividend, split, combination or reclassification) or shall represent the
right to receive some other security or property, as a result of any capital
reorganization or any merger or consolidation with another corporation in which
the Company is not the surviving corporation, or any sale of all or
substantially all of the assets of the Company to another corporation, such debt
shall (subject to further adjustment in conversion price as herein provided)
thereafter
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entitle Payee to acquire upon conversion hereof the kind and number
of shares of stock or other securities or property to which Payee would have
been entitled if Payee had converted this Note into Common Stock immediately
prior to such capital reorganization, merger, consolidation or sale of assets.
If the Conversion Rate shall be adjusted as provided in this SECTION 3(b), the
Company shall forthwith prepare a statement signed by the Chairman of the Board,
the President, any Vice President, the Secretary or the Treasurer of the
Company, showing in reasonable detail the facts requiring such adjustment and
the Conversion Rate that will be effective after such adjustment. The Company
shall forthwith cause such statement to be sent by first class mail, postage
prepaid, to Payee at its address appearing upon the Company's register.
(c) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
Neither this Note nor any of the shares of Common Stock of the Company issued
upon conversion of this Note, nor any interest in either, may be sold, assigned,
pledged, hypothecated, encumbered or in any other manner transferred or disposed
of, in whole or in part, except in compliance with applicable U.S. federal and
state securities or blue sky laws and the terms and conditions hereof. Each
certificate for the Common Stock issued pursuant to the conversion hereof, shall
bear a legend substantially in the form as set forth on the face hereof.
(d) COMPANY LIQUIDATION. In the event a voluntary or
involuntary dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation, merger or sale of all or substantially all of
the assets of the Company) is at any time proposed, the Company shall give at
least ten (10) days' written notice to Payee prior to the record date as of
which holders of Common Stock will be entitled to receive distributions as a
result of the proposed transaction. Such notice shall contain: (i) the date on
which the transaction is to take place, (ii) the record date as of which holders
of Common Stock will be entitled to receive distributions as a result of the
transaction, (iii) a brief description of the transaction, (iv) a brief
description of the distributions to be made to holders of Common Stock as a
result of the transaction, and (v) an estimate of the fair value of the
distributions. On the date of the transaction, if it actually occurs, the
Conversion Right granted under this Note shall terminate.
(e) NO FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of this Note. Instead of any fractional share
that would otherwise be issuable upon conversion, the Company will pay a cash
adjustment with respect to such fractional share in an amount equal to the same
fraction of the then effective conversion rate.
(f) RESERVATION OF SHARES. The Company shall at all times
reserve and hold available sufficient shares of Common Stock to satisfy all
conversion rights of this Note. Shares of Common Stock deliverable upon the
conversion of this Note shall, at delivery, be fully paid and nonassessable,
free from all taxes, liens and charges arising out of their issuance. In the
case of the conversion of less than all of the indebtedness of this Note, the
Company shall cancel this Note and execute and deliver a new Note of like tenor
and date for the balance of the unpaid and unconverted indebtedness.
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4. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS.
(i) REQUEST FOR REGISTRATION. At any time after
the date that is six (6) months from the date hereof, upon the written request
of Payee for the Company to register under the Securities Act of 1933, as
amended (the "Securities Act"), all or any portion of the Common Stock issuable
upon conversion hereof for sale in the manner specified in such notice, Payee
shall be obligated to convert this Note into shares of Common Stock and the
Company shall be obligated to file a registration statement with respect to such
shares of Common Stock within sixty (60) days of such request and shall use its
reasonable best efforts to have such registration statement declared effective
as soon thereafter as practicable; PROVIDED, HOWEVER, that the Company shall not
be required to file more than one (1) registration statement in total under this
SECTION 3(a). Notwithstanding anything to the contrary contained herein, the
Company shall not be obligated to effect a registration pursuant to this SECTION
3(a) within ninety (90) days after the effective date of a registration
statement filed by the Company covering a firm commitment underwritten public
offering in which Payee shall have been entitled to join pursuant to SECTION
3(b).
(ii) LIMITATIONS ON DEMAND REGISTRATIONS.
(A) The Company may postpone the filing of any registration
statement requested under this SECTION 3 for a reasonable period of time, not to
exceed ninety (90) days after receipt of the request if the Company furnishes to
Payee requesting a registration statement a certificate signed by the Company's
Chief Executive Officer or Chairman of the Board stating that, in the judgment
of the Board of Directors of the Company, a required registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is in the best interests of the Company to defer
the filing of such registration statement at such time; PROVIDED, HOWEVER, that
the Company shall not defer its obligation in this manner more than once in any
twelve-month period.
(B) Notwithstanding anything herein to the contrary, if a
required registration requested under this SECTION 3 is withdrawn or otherwise
fails to become effective, such request for registration shall not be considered
in calculating the number of required registrations available to Payee hereunder
if (i) the failure for such registration statement to become effective is a
result of the failure of the Company to comply with its covenants and agreements
hereunder, (ii) such registration is withdrawn by Payee because it has learned
of a material adverse change in the condition, business or prospects of the
Company not known to Payee at the time of its request, of which the Company had
knowledge at the time of the request; or (iii) such registration is withdrawn by
Payee requesting such registration because of market conditions outside the
control of the Company or Payee.
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(b) PIGGYBACK REGISTRATION.
(i) Each time that the Company proposes for any reason to
register any of its Common Stock under the Securities Act in connection with the
proposed offer and sale of its Common Stock for money either for its own account
or on behalf of any other security holder (each, a "Proposed Registration"),
other than pursuant to a registration statement on Form X-0, Xxxx X-0, or Form
S-8, or any successor forms thereto, the Company shall promptly give written
notice of such Proposed Registration to Payee and shall offer Payee the right to
request inclusion of the Common Stock issuable upon conversion hereof in the
Proposed Registration.
(ii) Payee shall have thirty (30) days from the receipt of
such notice to deliver to the Company a written request specifying the number of
shares of Common Stock Payee intends to sell and the holder's intended method of
disposition.
(iii) In the event that the Proposed Registration by the
Company is, in whole or in part, an underwritten public offering, the Company
shall so advise as part of the written notice given pursuant to SECTION 3(b)(i),
and any request under SECTION 3(b)(ii) must specify that the shares of Common
Stock be included in the underwriting on the same terms and conditions as the
shares of Common Stock, if any, otherwise being sold through underwriters under
such registration.
(iv) Upon receipt of a written request pursuant to SECTION
3(b)(ii), the Company shall promptly use its best efforts to cause all such
shares of Common Stock held by Payee to be registered under the Securities Act
(and included in any related qualifications under blue sky laws or other
compliance), to the extent required to permit sale or disposition as set forth
in the Proposed Registration.
(v) In the event that the offering is to be an underwritten
offering, the Payee proposing to distribute its shares of Common Stock through
such underwritten offering agrees to enter into an underwriting agreement and a
customary lock-up agreement with the underwriter or underwriters selected for
such underwriting by the Company.
(vi) If in the good faith judgment of the managing underwriter
in any underwritten offering, the inclusion of all of the shares of Common Stock
and any other Common Stock held by Payee requested to be registered would
interfere with the success of such offering, then the number of shares of Common
Stock held by Payee and other Common Stock to be included in the offering
(except for shares to be issued by the Company in an offering initiated by the
Company) shall be reduced to such smaller number as, in the opinion of such
underwriter, can successfully be sold with the participation in such offering by
Payee and the other holders of Common Stock.
5. WAIVER. Except as otherwise set forth herein, the Company and all
endorsers, sureties, and guarantors hereof hereby jointly and severally waive
all exemption rights under any applicable law, and also waive presentment for
payment, demand, notice of nonpayment, valuation, appraisement, protest, demand,
dishonor, notice of protest, notice of intent to accelerate, notice of
acceleration, and all other notices, and without further notice hereby consent
to all renewals,
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extensions, or partial payments either before or after maturity.
6. HIGHEST LAWFUL RATE. It is expressly stipulated and agreed to be the
intent of Company and Payee at all times to comply with the applicable state and
federal law governing the maximum rate or amount of interest payable on or in
connection with this Note (or applicable United States federal law to the extent
that it permits Payee to contract for, charge, take, reserve or receive a
greater amount of interest than under state law). If the applicable law is ever
judicially interpreted so as to make the amount of interest exceed any
applicable law or regulation, or render usurious any amount called for under
this Note, or under any of the other documents evidencing or relating to this
Note or any part thereof (collectively, the "Agreements"), or contracted for,
charged, taken, reserved or received with respect to the indebtedness evidenced
by this Note (the "Loan"), or if acceleration of the maturity of this Note or if
any prepayment by the Company results in the Company having paid any interest in
excess of that permitted by law, then it is the Company's and Payee's express
intent that all excess amounts theretofore collected by Payee be credited on the
principal balance of this Note (or, if this Note has been or would thereby be
paid in full, refunded to The Company), and the provisions of this Note and the
other Agreements immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to permit the recovery of the fullest
amount called for hereunder and thereunder, while complying in all respects with
applicable law. The right to accelerate the maturity of this Note does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration, and Payee does not intend to collect any unearned
interest in the event of acceleration. All sums paid or agreed to be paid to
Payee for the use, forbearance or detention of the Loan shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of the Loan until payment in full so that the rate or
amount of interest on account of the Loan does not exceed the applicable usury
ceiling. Notwithstanding any provision contained in this Note or in any of the
other Agreements that permits the compounding of interest, including without
limitation any provision by which any of the accrued interest is added to the
principal amount of this Note, the total amount of interest that the Company is
obligated to pay and Payee is entitled to receive with respect to this Note
shall not exceed the amount calculated on a simple (I.E., non-compounded)
interest basis at the Highest Lawful Rate on principal amounts actually advanced
to or for the account of the Company, including the initial principal amount of
this Note and any advances made pursuant to any of the Agreements (such as for
the payment of taxes, insurance premiums and the like). As used herein, the term
"Highest Lawful Rate" shall mean the maximum non-usurious rate of interest which
may be lawfully contracted for, charged, taken, reserved or received by Payee
from the Company in connection with the Loan under the applicable state law (or
applicable United States federal law, to the extent that it permits Payee to
contract for, charge, take, reserve or receive a greater amount of interest than
under state law).
7. BUSINESS PURPOSES. The Company hereby represents and warrants to
Payee that the loan evidenced hereby is a "contract under which credit is
extended for business, commercial, investment, or other similar purpose," and is
not a loan for "personal, family, household, or agricultural use," within the
meaning of the applicable Texas statutes.
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8. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
9. NO RIGHTS AS SHAREHOLDER. This instrument does not entitle the
holder to any voting rights or other rights as a shareholder of the Company, or
to any other rights whatsoever except the rights herein expressed. No dividends
are payable or will accrue on this instrument or the shares of Common Stock into
which the principal amount hereof may be converted until, and except to the
extent that, the conversion right granted in this instrument is exercised.
10. SEVERABILITY. If any provisions of this Note or any payments
pursuant to the terms hereof shall be invalid or unenforceable to any extent,
the remainder of this Note and any other payments hereunder shall not be
affected thereby and shall be enforceable to the greatest extent permitted by
law.
IN WITNESS WHEREOF, the Company has caused this Note to be executed on
the date first written above.
EPICEDGE, INC.
By:
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Its:
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CONVERSION FORM
The undersigned hereby:
(1) Irrevocably elects to convert $_____________ of the
indebtedness of this instrument into shares of the Common Stock of EpicEdge,
Inc. in accordance with the terms of said instrument;
(2) Requests that a certificate for such shares be issued in the
name of the undersigned and delivered to the undersigned at the address below;
and
(3) Requests that, if such indebtedness is not all of the unpaid
indebtedness under said instrument, a new instrument of like tenor for the
balance of the unpaid and unconverted indebtedness of said instrument be issued
in the name of the undersigned and delivered to the undersigned at the address
below.
Date:______________________ SIGNATURE:
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(Please sign exactly as name appears on
face of instrument)
Address:
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Taxpayer Identification Number:
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