Exhibit 4.1
CONVERTIBLE NOTE AGREEMENT
Up to $_______, subject to conditions
Walnut, California
Date:_____________, 2005
FOR VALUE RECEIVED, the undersigned Digital Lifestyles Group
Inc., a Delaware corporation ("Company"), hereby promises to pay
to ___________, with an address of ___________________,
("Holder"), at such place as Holder may specify, in lawful money
of the United States of America, the Initial Principal Amount (as
defined herein) of __________________ ($______) Dollars on
________________, 2006 (the "Initial Maturity Date"), plus
interest on the principal amount outstanding from time to time
hereunder at a rate equal to seven percent (7%) per annum.
Interest shall be calculated in arrears on the principal amount
outstanding through the last day of each month and shall be due
and payable in arrears in monthly installments on the first
business day of each month commencing on ____________, 2005 for
the Initial Principal Amount and ending on the Initial Maturity
Date, as may adjusted according to this Agreement. All interest
due hereunder shall be computed on the basis of a 365 day year.
In the event that the Company satisfies the conditions set
forth in Section 5 of this Agreement and Holder funds the
Conditional Principal Amount (as defined herein), then the face
value of this Agreement shall be increased by an additional
____________ ($________) Dollars to __________ ($______) Dollars
(which such principal amount due hereunder, as may be adjusted or
if not adjusted, shall be referred to hereafter as the "Aggregate
Principal Amount") and the Company promises to pay to Holder such
Conditional Principal Amount on or by ___________, 2006 (the
"Second Maturity Date") plus interest on the Aggregate Principal
Amount outstanding from time to time hereunder at a rate equal to
seven percent (7%) per annum. In the event of funding of the
Conditional Principal Amount, then the Initial Maturity Date
shall be delayed to correspond to the Second Maturity Date and
the Aggregate Principal Amount shall be due and payable on the
Second Maturity Date, which shall now be referred to hereinafter
as the "Maturity Date". Interest shall be calculated and paid
as stated above.
The Company shall pay interest only on the Aggregate
Principal Amount outstanding hereunder from the date of this
Agreement until the day immediately prior to the Maturity Date.
On the Maturity Date, the Company shall repay the Aggregate
Principal Amount outstanding plus any otherwise unpaid interest
in the full amount, unless either (i) Holder elects to convert
this Agreement into shares of common stock of the Company in
accordance with Section 4; or (ii) the Company elects to prepay
all of this Agreement in accordance with Section 3 and Holder
declines or does not exercise his right to convert this Agreement
into shares of common stock of the Company in accordance with
Section 4. In the event that Company elects to prepay part of
this Agreement in accordance with Section 3 and Holder declines
or does not exercise his right to convert this Agreement into
shares of common stock of the Company in accordance with Section
4 (as may be adjusted pursuant to Section 7(m), then on the
Maturity Date, the Company shall repay the remaining Aggregate
Principal Amount then outstanding plus any otherwise unpaid
interest in the full amount.
1. Advances; Payments. On or before the date of this
Convertible Note Agreement (the "Agreement"), Holder will deliver
to Company in immediately available funds the Initial Principal
Amount specified above (net of any costs and expenses to be paid
by Company to Holder). Thereafter, this Agreement may be
adjusted as set forth in Section 5 and as stated above.
All payments under this Agreement shall be applied first to
interest and then to principal. Any principal or interest
payments on this Agreement outstanding after the occurrence and
during the continuance of a default under this Agreement shall
bear interest at a rate equal to the lesser of (i) the lawful
legal rate or (ii) three percent (3%) above the interest rate
otherwise applicable under this Agreement.
2. Representations, Warranties and Covenants of Company.
(a) Corporate Existence and Authority. Company is
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Company has all requisite power
to execute and deliver this Agreement, and to perform the
provisions of this Agreement and to consummate the transactions
contemplated by this Agreement. The execution, delivery and
performance of this Agreement, and the consummation of the
transactions contemplated by this Agreement, have been duly
authorized and approved by Company.
(b) Compliance with Law. Company has complied, and
will comply, in all material respects, with all provisions of all
applicable laws and regulations, including, but not limited to,
those relating to Company's ownership of real or personal
property, the conduct and licensing of Company's business, and
all environmental matters.
(c) Disclosure. No representation, other statement or
information made or provided by Company to Holder contains any
untrue statement of a material fact or omits to state a material
fact necessary to make any statements made to Holder not
misleading.
(d) Information. Company will provide Holder with
access to or copies of Company's books, records, financial
statements and such additional financial and other information as
Holder may reasonably request from time to time; provided,
however, to the extent such information is not otherwise publicly
available, such information shall be kept confidential by Holder.
3. Prepayments. For the first six (6) months from the date of
funding of the Initial Principal Amount or the Conditional
Principal Amount, as the case may be, Company may not, at any
time, prepay the loan evidenced hereby. Thereafter upon the
expiration of the respective time periods, upon written notice by
the Company to the Holder, Company may, at its option, elect to
prepay all or part of the Aggregate Principal Amount plus any
unpaid and accrued interest due hereunder without penalty.
Thereafter, interest will continue to accrue as set forth herein
on the remaining principal amount not prepaid by the Company.
Notwithstanding any of the forgoing provisions, upon receipt of
the Company's notice to prepay all or part of the Aggregate
Principal Amount plus any unpaid and accrued interest due
hereunder, Holder shall have the right to prevent Company from
prepaying by electing to convert the principal amount due into
shares of the common stock of the Company in accordance with
Section 4 herein.
4. Optional Conversion.
(a) At Holder's sole and exclusive option, at any time
after the effective date of this Agreement or within three (3)
business days following receipt of notice by the Company that it
wishes to exercise its prepayment rights set forth in Section 3,
the outstanding principle balance due under the loan as of the
Conversion Date evidenced by this Agreement shall be convertible,
without the payment of any additional consideration by the Holder
and at the option of the Holder, into shares of common stock of
the Company. In the event the Holder elects to convert, Company
shall issue the number of shares of common stock equivalent to
the amount calculated by converting the outstanding principle
balance and all unpaid and accrued interest due under the loan
evidenced by this Agreement as of the Conversion Date into such
shares of common stock at a price per share of $0.25. The
outstanding principal shall continue to accrue interest, and
Company shall be obligated to pay such interest, according to the
terms and conditions of this Agreement until the Conversion Date
(as defined below). All unpaid and accrued interest due under
the loan as of the Conversion Date evidenced by this Agreement
shall be paid in cash within three (3) business days from the
Conversion Date.
(b) In order for the Holder to convert all Aggregate
Principal Amounts owing under this Agreement into shares of
common stock of the Company, Holder shall deliver a written
notice to Company that the Holder elects to convert this
Agreement. Any conversion made at the election of the Holder
shall be deemed to have been made immediately prior to the close
of business on the date Company is deemed to have received such
notice, and the Holder or its nominee or nominees entitled to
receive the shares of common stock of the Company shall be
treated for all such purposes as the record holder or holders of
such shares of common stock on such date (the "Conversion Date").
Company shall have no obligation to issue any fractional shares
upon conversion. Any fractional shares shall be rounded up to
the nearest whole share.
(c) The Company agrees (a) that the shares issuable
upon conversion of this Agreement shall be "Registrable
Securities" under the Registration Rights Agreement (the
"Registration Rights Agreement") between the Company and Holder,
a copy of which is attached hereto and incorporated herein by
reference as Exhibit A and (b) that the Holder shall have the
rights and obligations of a Holder set forth on the Registration
Rights Agreement.
5. Conditions. The following conditions shall govern this
Agreement:
(a) Holder shall hereby agree to pay ______________
($_______) Dollars immediately upon the execution of this
Agreement by wire transfer ("Initial Principal Amount");
(b) Holder shall be required to pay the remaining ________
($______) Dollars on or before __________ by wire transfer or
certified check ("Conditional Principal Amount"), subject to the
Company receiving additional funding of $________ on or by
__________.
In the event that the Company fails for any reason to
receive additional funding of $_______ by_________, then Holder
shall not be obligated to fund the Conditional Principal Amount.
All other provisions of this Agreement shall remain in full force
and effect with respect to the Initial Principal Amount.
6. Fees and Expenses. Each party to this Agreement shall be
responsible for all costs and expenses, including reasonable
attorneys' fees incurred in the preparation of this Agreement and
the other documents executed in connection with this Agreement.
Company shall also have delivered a warrant to purchase stock to
Holder in form reasonably acceptable to Holder (together with the
Agreement and any other documents delivered in connection with
this Agreement, the "Loan Documents"). Company shall pay all
reasonable and actual costs that Holder incurs in successfully
enforcing this Agreement, including without limitation reasonable
attorneys' fees and expenses.
7. Events of Default; Remedies.
(a) Events of Default. If any of the following events
("Events of Default") shall occur and be continuing (for any
reason whatsoever and whether it shall be voluntary or
involuntary or by operation of law or otherwise):
(i) default shall be made in the payment of the
principal of, or interest on, the loan when and as the
same shall become due and payable, whether at stated
maturity, by acceleration, upon a mandatory prepayment
due date or otherwise; or
(ii) default shall be made in the performance or
observance of any covenant, agreement or condition
contained in this Agreement and such default shall have
continued for a period of five (5) business days; or
(iii) Company's dissolution, termination of
existence or insolvency, the appointment of a receiver
of all or any part of the property of Company; an
assignment for the benefit of creditors by Company; or
the commencement of any proceeding under any bankruptcy
or insolvency laws by or against Company which results
in the entry of an order for relief or which remains
undismissed, undischarged or unbonded for a period of
60 days or more; or
(iv) any representation, warranty, financial
statement or other information statement by Company to
Holder, or any other documents or agreements
contemplated hereby and thereby or in any certificate
or other instrument delivered hereunder or pursuant
hereto or in connection with any provision hereof shall
be false or incorrect in any material respect on the
date as of which made;
then (x) upon the occurrence of any Event of Default
described in (iii), the unpaid principal amount of the loan,
together with the interest accrued thereon and all other amounts
payable by Company under this Agreement, shall automatically
become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are
hereby expressly waived by Company or (y) upon the occurrence of
any other Event of Default, Holder may, by written notice to
Company, declare the unpaid principal amount of the loan to be,
and the same shall forthwith become, due and payable, together
with the interest accrued thereon and all other amounts payable
by Company hereunder.
(b) Suits for Enforcement. If any Event of Default
shall have occurred and be continuing, Holder may proceed to
protect and enforce its rights against Company, either by suit in
equity or by action at law, or both, whether for the specific
performance of any covenant or agreement contained in this
Agreement or in aid of the exercise of any power granted in this
Agreement, or Holder may proceed to enforce the payment by
Company of all sums due under this Agreement or to enforce any
other legal or equitable right of Holder. Company covenants
that, if it shall default in the making of any payment due
hereunder or in the performance or observance of any agreement
contained in this Agreement, it will pay to Holder such further
amounts, to the extent lawful, to cover any reasonable costs and
expenses of collection or of otherwise enforcing Holder's rights,
including without limitation the reasonable counsel fees and
costs and expenses incurred in connection with any restructuring,
negotiation, refinancing, workout, bankruptcy or other similar
transaction or proceeding.
(c) Remedies Cumulative. No remedy herein conferred
upon Holder is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute or
otherwise.
(d) Remedies Not Waived. No course of dealing between
Company and any other person and no delay or failure in
exercising any rights hereunder or under the loan in respect
thereof shall operate as a waiver of Holder's rights.
8. Miscellaneous.
(a) Successors and Assigns. This Agreement shall bind
and inure to the benefit of and be enforceable by Company, Holder
and each of their respective successors and assigns, and, in
addition, shall inure to the benefit of and be enforceable by
each person who shall from time to time be a holder of the loan.
(b) Notices. All notices and other communications
provided for in this Agreement shall be in writing and delivered
by registered or certified mail, postage prepaid, or delivered by
overnight courier (for next business day delivery) or telecopied,
addressed as follows, or at such other address as any of the
parties hereto may hereafter designate by notice to the other
parties given at the addresses set forth on the signature page:
If to Company: Digital Lifestyles Group Inc..
ATTN: Xxxx Xxxx, CEO
000 Xxxx Xxxxxx Xxxx
#0
Xxxxxx, XX 00000
If to Holder: __________________
__________________
Any such notice or communication shall be deemed to
have been duly given on the fifth (5th) day after being so
mailed, the next business day after delivery by overnight
courier, when received when sent by telecopy or upon receipt when
delivered personally.
(c) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument. Signatures may be exchanged by telecopy, with
original signatures to follow.
(d) Amendments. This Agreement may only be amended by
a writing duly executed by the parties hereto.
(e) Severability. If any term or provision of this
Agreement or any other document executed in connection herewith
shall be determined to be illegal or unenforceable, all other
terms and provisions hereof and thereof shall nevertheless remain
effective and shall be enforced to the fullest extent permitted
by applicable law.
(f) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California and the United States of America, both substantive and
remedial. Any judicial proceeding brought against either of the
parties to this agreement or any dispute arising out of this
Agreement or any matter related hereto may be brought in the
courts of the State of California or in the United States
District Court for the Central District of the State of
California and, by its execution and delivery of this agreement,
each party to this Agreement accepts the jurisdiction of such
courts. The foregoing consent to jurisdiction shall not be deemed
to confer rights on any person other than the parties to this
Agreement.
(g) Entire Agreement. This Agreement contains the
entire Agreement of the parties hereto with respect to the
transactions contemplated hereby and supersedes all previous oral
and written, and all previous contemporaneous oral negotiations,
commitments and understandings.
(h) Further Assurances. The parties agree to promptly
to execute and deliver such documents and to take such other acts
as are reasonably necessary to effectuate the purposes of this
Agreement.
(i) Headings. The headings contained herein are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(j) Assignments and Participations. Company may not
assign its rights or obligations hereunder or under the loan
without the prior written consent of Holder. Holder may assign
all or any portion of the loan or warrant without the prior
consent of Company. Holder may sell or agree to sell to one or
more other persons a participation in all or any part of any of
the loan or warrant without the prior consent of Company. Upon
surrender of the loan or warrant, Company shall execute and
deliver one or more substitute notes, warrants or other
securities in such denominations required by Holder's designated
transferee or transferees. Holder may furnish any information in
the possession of Holder concerning Company, or any of its
respective subsidiaries, from time to time to assignees and
participants (including prospective assignees and participants).
(k) Waivers; Indemnity. Company waives presentment
and demand for payment, notice of dishonor, protest of this
Agreement, and shall pay all costs of collection when incurred,
including reasonable attorneys' fees, costs and expenses.
Company shall indemnify and hold harmless from any claim,
obligation or liability (including without limitation reasonable
attorneys fees and expenses) arising out of this Agreement.
(l) JURY WAIVER. HOLDER AND COMPANY EACH WAIVES ANY
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT
OF ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
(m) In the event of any dividend or other distribution
(whether in the form of cash, common stock, other securities, or
other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase, liquidation, dissolution,
or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, or exchange of
common stock or other securities of the Company, issuance of
warrants or other rights to purchase common stock or other
securities of the Company, or other similar corporate transaction
or event (an "Event"), and in the opinion of the Board, such
event affects the common stock such that an adjustment is
determined by the Board to be appropriate in order to prevent
dilution or enlargement of the right or potential rights intended
to be made available under this Agreement, then the Board shall,
in such manner as it may deem equitable, including, without
limitation, adjust any or all of the following: (i) the number
and kind of shares of common stock (or other securities or
property) which may be issued pursuant to this Agreement; (ii)
the exercise price which may be issued pursuant to this
Agreement. The Board's determination under this section shall be
final, binding and conclusive.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year set forth above.
COMPANY: HOLDER:
By: _____________________ By:_____________________
Xxxx Xxxx
Chief Executive Officer
