Exhibit 4.3
CONVERTIBLE NOTE AGREEMENT
This Convertible Note Agreement ("Agreement") dated as of January 15,
2002 (the "Effective Date") is made by and between Hand Brand Distribution,
Inc., a Florida corporation (the "Company") and those individuals listed on
Exhibit A, attached and incorporated by reference (individually a "Note Holder"
and collectively "Note Holders").
RECITALS
A. The Note Holders are willing to lend Company the aggregate sum of Five
Hundred Thousand Dollars US (US$500,000) (collectively the "Obligations"), which
Obligations shall be evidenced by one or more Convertible Promissory Notes
("Notes"), the form of which is attached hereto as Exhibit B, all pursuant to
the terms and conditions described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained in this agreement, the parties agree, represent and warrant as
follows:
RECITALS. The above recitals are true, correct and incorporated herein by
reference.
SALE AND PURCHASE OF THE NOTES
A. As of the Effective Date, the Company will authorize and sell
the Notes to the Note Holders, each of whom shall purchase the
principal amount of the Notes set forth on Exhibit A, subject
to the terms and conditions of this Agreement and in reliance
upon the representations and warranties contained in this
agreement. The purchase price for the Notes shall be one
hundred percent (100%) of the principal amount so purchased..
The Notes may be dated and issued separately but which will
all mature on January 15, 2005 (the "Maturity Date"), unless
terminated earlier pursuant to the terms and conditions of
this Agreement.
B. The Notes shall bear interest on the unpaid principal amount
at the rate of six percent (6.0%) per year, payable on January
15th of each year, through the Maturity Date. To the extent
that any Obligations, in all or in part, is outstanding at any
time after the Maturity Date, the interest rate shall be
twelve percent (12.0%) per year. For the purposes of
calculating interest for any period for which the interest
shall be payable, such interest shall be calculated on the
basis of a thirty (30) day month and a three hundred sixty
(360) day year.
C. The Company will promptly and punctually pay to Note Holders
or their nominee the interest on any of the Notes held by Note
Holders without presentment of the Notes. In the event any
Note Holder shall sell or transfer any of the Notes, such Note
Holder shall notify the Company of the name and address of the
transferee. In the event the Company defaults on any
installment of interest or principal, then any Note Holder
may, at such Note Holder's option, without notice, declare the
entire principal and the interest accrued thereon immediately
due and payable and may proceed to enforce the collection
thereof.
D. Neither the Company nor any agent or employee acting in its
behalf (i) has offered the Notes or any underlying shares or
any portion thereof for sale to or solicited in any offer to
buy the same from anyone other than the Note Holders listed on
Exhibit A, and (ii) will sell or offer for sale the Notes or
any underlying shares or any portion thereof to or solicit any
offer to buy the Notes from anyone so as to bring the issuance
or sale thereof within the provisions of Section 5 of the
Securities Act of 1933, as amended ("Securities Act").
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
A. The Company (i) is a corporation existing in good standing
under the laws of the State of Florida and (ii) has the
corporate power to own property and to carry on in the
business as it is now being conducted.
B. The Company has timely made all filings require of it by the
Securities Exchange Commission since its incorporation, which
are a part of its public record.
C. There is no action or proceeding pending or to the Company's
knowledge, threatened against the Company before any court or
administrative agency, the determination of which might result
in any material adverse change in the business of the Company.
D. The Company has title to the respective properties and assets
including the properties and assets reflected on the financial
statement for the year ending December 31, 2001 and which
assets and properties are subject to no liens, mortgages,
encumbrances or charges.
E. The Company is not a party to any contract or agreement or
subject to any restriction which materially and adversely
affects its business, property, assets, or financial
condition, and neither the execution nor delivery of this
Agreement, nor the confirmation of the transactions
contemplated herein, nor the fulfillment of the terms hereof,
nor the compliance with the terms and provisions hereof and of
the Notes will conflict with or result in the breach of the
terms, conditions or provisions or constitute a default, under
the Articles of Incorporation or of any Agreement or
instrument to which the Company is now a party upon conversion
of the Notes pursuant to the conversion privileges hereinafter
stated .
F. The Company has not declared, set aside, paid or made any
dividend or other distributions with respect to its capital
stock and has not made or caused to be made directly or
indirectly any payment or other distribution of any nature
whatsoever to any of the Note Holders of its capital stock
except for regular salary payments for services rendered and
the reimbursement of business expenses.
G. All of the equipment and other tangible assets of the Company,
if any, are in good condition and repair.
H. The Company owns or possesses adequate licenses or other
rights to use all patents, trademarks, trade names, trade
secrets, and copyrights used in its business. No one has
asserted to the Company that its operations infringe on the
patents, trademarks, trade secrets or other rights utilized in
the operation of its business.
I. The Company shall reserve such number of shares of its common
stock as may, from time to time, be the maximum number of
shares issuable, assuming conversion of all the Notes into
fully paid and non-assessable shares of restricted Company
common stock ("Conversion Stock"), as contemplated herein.
REPRESENTATIONS AND WARRANTIES BY THE NOTE HOLDERS
Each Note Holder individually represents and warrants that:
A. The Note Holder is subscribing for the Notes for investment
purposes and not with the view to or for sale in connection
with any distribution thereof and that he has no present
intent to sell, give or otherwise transfer the Notes or Stock.
Upon conversion of the Note, the Conversion Stock will be
received by the Note Holder for investment purposes for its
own account, and not with the view to, or for resale in
connection with, any distribution thereof. Note Holder
understands that the Conversion Stock will not been registered
under the Securities Act, or under the securities laws of
various states, by reason of a specified exemption from the
registration provisions thereunder.
B. The Note Holder states that such Note Holder is a resident of
the State indicated on Exhibit A as to such Note Holder.
C. The Note Holder understands that investing in the Notes is a
highly speculative investment in a Company, which is insolvent
both from a legal and an equity standpoint.
D. The Note Holder has a net worth in excess one million dollars
($1,000,000) exclusive of their residences and that they are
sophisticated investors who are knowledgeable about the
business.
E. The Note Holder shall hold the Conversion Stock indefinitely
unless such shares are subsequently registered under the
Securities Act and under applicable state securities laws or
an exemption from such registration is available. Note Holder
has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act which permits limited
resale of the securities purchased in a private placement
subject to the satisfaction of certain conditions including,
among other things, the availability of certain current public
information about Company and compliance with applicable
requirements regarding the holding period and the amount of
securities to be sold and the manner of sale.
F. The Note Holder has (i) received and carefully reviewed all
other information filed by Company pursuant to the Securities
Act or the Securities Exchange Act of 1934, as amended and
asked questions, including financial, of the Company's
management concerning the Company.
G. The Note Holder represents is an "Accredited Investor" as the
term is defined in Rule 501(a) of Regulation D under the
Securities Act.
PREPAYMENT OF THE NOTES
A. So long as the Company's stock is trading on a "Principal
Market" at less than $1.00 per share for twenty consecutive
days, the Company shall have the right to make prepayments on
principal of the Notes at any time on ten (10) days prior
written notice to the Note Holders. Such prepayment shall be
accompanied by a payment of all accrued interest to date.
There shall be no premium for the amount so prepaid.
B. Principal Market" means the Nasdaq National Market, the Nasdaq
Small-Cap Market, the OTC Bulletin Board, the American Stock
Exchange or the New York Stock Exchange, whichever is at the
time the principal trading exchange or market for the Common
Stock. As of the date of this Agreement, the OTC Bulletin
Board Market is the Principal Market.
6. CONVERSION.
A. The Note Holder of any of the Notes at any time up to on or
prior to the Maturity Date, or, as to any of the Notes to
which notice of prepayment shall have been given, at any time
up to the close of business on the third business day prior to
the day fixed for prepayment but not thereafter, may convert
the Notes in whole or in part into as many shares of
Conversion Stock as the principal amount of the Note on a one
share for $1.00 basis. If any of the Notes shall be converted
in part, the Company shall, without charge to the Note Holder
execute and deliver to the Note Holder a new Note for the
balance of the principal amount so converted.
B. All Notes shall automatically convert at any time the price of
the shares on the Principal Market as a publicly traded
security closes above three dollars ($3.00) per share for
twenty (20) trading consecutive days, on a one share of
Conversion Stock for $1.00 basis.
C. Upon conversion of any of the Notes, all accrued and unpaid
interest on the principal amount converted shall be paid to
the Note Holder by the Company in Conversion Stock on a one
share of Conversion Stock for $1.00 basis.
D. In the event the Company shall at any time divide its
outstanding shares of Common Stock into a greater number of
shares, the conversion price in effect immediately prior to
such subdivision should be proportionately reduced, and,
conversely, in the case of outstanding shares of Common Stock
of the Company shall be combined into a smaller number of
shares, the actual conversion price in effect immediately
prior to such combination shall be proportionately increased.
E. In the event the Company shall declare a dividend or make a
distribution of any Stock of the Company payable in Common
Stock or in convertible securities, the aggregate maximum
number of shares of Common Stock available for issue in
payment of such dividend or distribution, or upon conversion
of or in exchange for such convertible securities available
for issue in payment of such dividend or distribution, shall
be deemed to have been issued or sold without consideration.
F. No fractional share of Common Stock shall be issued upon
conversion of any of the Notes. If any Holder of the Notes
shall have converted all the Notes held by him other than a
principal amount so small that less than a whole share of
Common Stock would be available for issue upon conversion
thereof, the Company may elect to prepay such balance, with
interest accrued thereon to the date fixed for prepayment, or
leave the same outstanding until the maturity of the Note.
G. In any reclassification or change of outstanding shares of
Common Stock available for issue upon conversion of the Notes
(other than a change in stated value or from no par to par
value) or in the case of any consolidation or merger of the
Company with any other corporation, or in the case of the sale
and conveyance to another corporation or person of the
property of the Company in its entirety or substantially as an
entirety, the Company shall, as a condition precedent to such
transaction, cause effective provisions to be made that each
Holder of the Notes then outstanding shall have the right
thereafter to convert the Notes into the kind and amount of
shares of Stock and other securities and property receivable
upon such reclassification, change, consolidation, merger,
sale or conveyance by a Holder of the number of shares of
Common Stock in the Company into which such Notes might have
been converted immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance. In the
event of a change of control of the Company, it shall have the
right, at its option, to covert any or all of the Notes,
pursuant to the terms and conditions of this agreement.
7. COVENANTS
The Company covenants that so long as the Obligations under the Notes
remain outstanding, the Company will cause its Common Stock to continue
to be registered under Section 12(g) or 12(b) of the Exchange Act, will
use its reasonable efforts to comply in all respects with its reporting
and filing Obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by Exchange Act
or the rules thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing Obligations under said
Act.
8. EVENT OF DEFAULT
A. The breach of any of the events or conditions contained in
Section 7 of this Agreement shall constitute an event of
default under this Agreement. Any one or more of the Note
Holders of the Notes may give written notice of such breach
and if the Company shall within thirty (30) days after receipt
of such written notice have failed to correct such occurrence
or condition, then the Note Holder of anyone of the Notes may,
at its option and without notice, declare the entire principal
and interest accrued thereon immediately due and payable and
may proceed with collection.
B. If the Company has made a material misrepresentation in
connection with this Agreement or with the transactions
contemplated by this Agreement, or if the Company makes an
assignment for the benefit of creditors, or a trustee or
receiver is appointed for the Company; or if any proceeding
involving the Company is commenced under any bankruptcy,
reorganization, arrangement, insolvency, statute or law, such
event shall be deemed a default which will immediately
entitled Holders of the Notes, at their option and without
notice, to declare the entire amount of interest accrued
thereon immediately due and payable and proceed to enforce the
collection thereof.
C. In case of default in the payment of any installment or
principal, the Note Holders of the Notes may, at their option
and without notice, declare the entire principal and the
interest accrued thereof immediately due and payable and may
proceed to enforce the collection thereof.
9. SECURITIES MATTERS
A. Each Note Holder is aware that no federal or state or other
agency has passed upon or made any finding or determination
concerning the fairness of the transactions contemplated by
this Agreement or the adequacy of the disclosure of the
exhibits and schedules hereto and the Note Holder must forego
the Conversion Stock, if an, that such a review would provide.
B. Each Note Holder understands and acknowledges that neither the
Internal Revenue Service nor any other tax authority has been
asked to rule on nor has it ruled on the tax consequences of
the transactions contemplated hereby.
C. Each Note Holder understands that all certificates for the
Conversion Stock shall bear a legend in substantially the
following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE ISSUER OF AN
OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT SUCH DISPOSITION
WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS."
10. MISCELLANEOUS
A. Any and all notices, approvals or other communications to be
sent to the parties shall be deemed validly and property given
if made in writing and delivered by hand or by registered or
certified mail, return receipt requested, and addressed to the
Company at its principal office or to the Note Holders of the
Notes at the addresses given to the Company by such Note
Holders.
B. This Agreement may not be modified, amended or terminated
except by written agreement executed by all the parties
hereto.
C. The waiver of any breach or default hereunder shall not be
considered valid unless in writing and signed by the party
giving such notice and no waiver shall be deemed a waiver of
any subsequent breach or default of same.
D. The paragraph headings contained herein are for the purpose of
convenience only and are not intended to define or limit the
contents of such.
E. The validity, constructional interpretation and enforceability
of this Agreement and the Notes executed pursuant to this
Agreement shall be determined and governed by the laws of the
State of New York.
F. This Agreement shall be binding upon and inure to the benefit
of the company and its successors and assigns.
G. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
HAND BRAND DISTRIBUTION, INC
ATTEST:
BY: __________________________________ _________________________________
CHIEF EXECUTIVE OFFICER SECRETARY
BY:____________________________________________
NOTE HOLDER
EXHIBIT A
NOTE HOLDERS
--------------------------------------- ------------------------------------- ---------------------- ---------------------
STATE OF RESIDENCE/ PRINCIPAL AMOUNT OF
NOTE HOLDER ADDRESS INCORPORATION NOTE
--------------------------------------- ------------------------------------- ---------------------- ---------------------
FIDRA Holdings, Ltd. One Cable Beach Court Foreign $30,000.00
Nassau Bahamas
--------------------------------------- ------------------------------------- ---------------------- ---------------------
Xxxx X. Xxxxxxx S.W. 32nd Street Florida $15,300.00
Xxxxx, Xxxxxxx 00000
--------------------------------------- ------------------------------------- ---------------------- ---------------------
WWStreet 0000 Xxxxxxx Xxxx Xxxx Tenn. $16,000.00
Xxxxxxxxx, XX 00000
--------------------------------------- ------------------------------------- ---------------------- ---------------------
Xxxxx Xxxxxxx $5,000.00
--------------------------------------- ------------------------------------- ---------------------- ---------------------
Raffles-Toho, Inc 000 Xxxxxxxxx Xxxxx, Xxxxx 0X Xxx Xxxx $4,500.00
Xxx Xxxx, Xxx Xxxx 00000
--------------------------------------- ------------------------------------- ---------------------- ---------------------
Xxxxx X. Xxxxxx 0000 X.X. 00xx Xxxxx Xxxxxxx 5,000
Xxxxx, Xxxxxxx 00000
--------------------------------------- ------------------------------------- ---------------------- ---------------------
EMS Distributors 0000 Xxx Xxxxxxxx Xxxx Xxxxxxx $3,000.00
Xxxxxx Xxxxx, XX 00000
--------------------------------------- ------------------------------------- ---------------------- ---------------------
-----------
Initialed
-----------
Initialed
EXHIBIT B
CONVERTIBLE PROMISSORY NOTE
(TERM LOAN)
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS
CONVERTIBLE PROMISSORY NOTE NOR ANY INTEREST THEREIN(INCLUDING THE SHARES OF
CLASS B NON-VOTING COMMON STOCK INTO WHICH THIS NOTE IS CONVERTIBLE) MAY BE
OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS THIS CONVERTIBLE
PROMISSORY NOTE IS FIRST REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND/OR QUALIFIED UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR UNTIL
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, THAT THIS CONVERTIBLE PROMISSORY NOTE MAY LAWFULLY
BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT SUCH REGISTRATION
AND/OR QUALIFICATION IN RELIANCE UPON AN APPLICABLE EXEMPTION.
HAND BRAND DISTRIBUTION, INC..
CONVERTIBLE PROMISSORY NOTE
Interest Rate: 6% per year through Maturity Date
12% per year following Maturity Date
Convertible into shares of Restricted Common Stock
of Hand Brand Distribution, Inc..
at $1.00 per Share, subject to adjustment
Amount: $_______
Boca Raton, Florida Dated: _______, 2002
For value received, HAND BAND DISTRIBUTION, INC., a Florida corporation whose
address is _____________________________ ("Company"), promises to pay to
_____________________, a(n) ______________________________ having an address of
_____________________________________________ ("Payee"), the principal amount of
__________________________________Dollars ($_______) (the "Obligations"),
together with interest from the date hereof as described below.
This Convertible Promissory Note ("Note") is issued pursuant to a Convertible
Note Agreement and Subscription Agreement (collectively the "Agreement") between
the Company and the Payee, in connection with an offering of up to $500,000
principal amount.
2
This Note is subject to the following terms and conditions:
1. Principal and Interest Payments.
-------------------------------
a. This Note bears interest from the date hereof at a rate of at the
rate of (i) six percent (6%) per year through January 15, 2005 (the "Maturity
Date") and (ii) twelve percent (12%) January 16, 2005 and until such time as the
Obligations shall be paid or satisfied in full, which will accrue daily from the
date of this Note and be payable on the Maturity Date (as herein defined), which
interest payments may be made in the form of cash, shares of the Company's
restricted Common Stock, $.002 par value ("Common Stock") or a combination of
cash and shares.
b. The entire unpaid principal, together with any accrued but unpaid
interest, shall be due and payable in full on January 15, 2005 (the "Maturity
Date").
c. All computations of interest made or called for herein shall be made
on the basis of a 366-day year for the actual number of days elapsed.
d. All payments due on this Note shall be applied first to accrued
interest, and second, to any remainder in payment of principal.
e. Except as otherwise provided in this Note, all payments of principal
and interest on this Note shall be paid in the legal currency of the United
States of America.
2. Optional Prepayments.
--------------------
a. So long as the Company's stock is trading on a "Principal Market",
as defined below, at less than $1.00 per share for twenty (20) consecutive
trading dates, the Company may, without penalty, prepay this Note in whole or in
part, at any time upon ten (10) days prior written notice to the Payee (the
"Company Notice"). Such prepayment shall be accompanied by a payment of all
accrued interest to day; provided that no there shall be no premiums for any
prepaid amounts.
b. "Principal Market" means the Nasdaq National Market, the Nasdaq
Small-Cap Market, the OTC Bulletin Board, the American Stock Exchange or the New
York Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock. As of the date of this Agreement, the OTC Bulletin
Board Market is the Principal Market.
3. Conversion of Note.
-------------------
a. At any time from the date hereof up to and including the Maturity
Date, or as to the Note, the Payee at any time up to on or prior to the Maturity
Date, or, as to any notice of prepayment shall have been given, at any time up
to the close of business on the third business day prior to the day fixed for
prepayment but not thereafter, may convert the Note in whole or in part into as
many fully paid and non-assessable shares of Common Stock as the principal
amount of the Note on a one share for $1.00 basis. If the Note shall be
converted in part, the Company shall, without charge to the Note Holder execute
and deliver to the Payee a new Note for the balance of the principal amount so
converted.
3
b. The Note shall automatically convert at any time the price of the
shares on the principal market as a publicly traded security closes above three
dollars ($3.00) per share for twenty (20) trading consecutive days, on a one
share for $1.00 basis.
c. Upon conversion of the Note, all accrued and unpaid interest on the
principal amount converted shall be paid to the Payee by the Company in Common
Stock on a one share of Common Stock for $1.00 basis.
d. No fractional share of Common Stock shall be issued upon conversion
of any of the Notes. If the Payee shall have converted the Note held by him
other than a principal amount so small that less than a whole share of Common
Stock would be available for issue upon conversion thereof, the Company may
elect to prepay such balance, with interest accrued thereon to the date fixed
for prepayment, or leave the same outstanding until the maturity of the Note.
4. Adjustment to Applicable Conversion Rate.
----------------------------------------
a. Adjustment for Stock Splits and Subdivisions. In the event the
Company should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "Common Stock Equivalents")
without payment of any consideration by such holder for the additional shares of
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if not record date
is fixed), the Conversion Price of this Note shall be appropriately decreased so
that the number of shares of Common Stock issuable upon conversion of this Note
shall be increased in proportion to such increase of outstanding shares.
b. Adjustments for Reverse Stock Splits. If the numbers of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for this Note shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.
5. Place of Payment. Payment shall be made to Payee at the address for
Payee set forth herein or at such other place as Payee may designate in writing.
4
6. Default.
-------
a. The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
i. Failure of Company to pay the principal and any
accrued interest in full on the Maturity Date of this
Note and the continuation of such failure for thirty
(30) business days after receipt by Company of notice
of such failure and demand for payment; or
ii. Company's consent to the appointment of a receiver,
trustee or liquidator of itself or of a substantial
part of its property, or Company's admittance in
writing of its inability to pay its debts generally
as they become due, or Company's general assignment
for the benefit of creditors, or Company's filing of
a voluntary petition in bankruptcy, or a voluntary
petition or answer seeking reorganization in a
proceeding under any bankruptcy law (as now or
hereafter in effect), or the filing by Company of a
voluntary petition, answer or consent, seeking relief
under the provisions of any other now existing or
future bankruptcy or other similar law providing for
the reorganization or winding up of corporations, or
Company, fails to discharge within ninety (90) days
any involuntary petition in bankruptcy filed against
it or if it is adjudicated a bankrupt.
iii. Any event of default described in Section 8 of the
Convertible Note Agreement, a copy of which is
attached to this Note.
b. Upon the occurrence of any Event of Default, all amounts due under
this Note, including the unpaid balance of principal and interest hereof, shall
become immediately due and payable at the option of Payee, without demand or
notice whatsoever, and Payee may immediately and without demand exercise any of
Payee's rights and remedies granted herein, under applicable law, or which Payee
may otherwise have against Company or otherwise at law or equity.
7. Assignment. The rights and Obligations of the Company and the Payee of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties. The Payee may not endorse,
negotiate, transfer or assign (collectively, "transfer") this Note or Payee's
rights hereunder without the prior written consent of the Company, which consent
shall not be unreasonably withheld. Such consent may be withheld, among other
reasons, if such transfer would, in the reasonable opinion of the Company,
violate applicable securities laws.
8. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address for
future notice hereunder. Notice shall conclusively be deemed to have been given
when personally delivered or when deposited in the mail or telegraphed in the
manner set forth above and shall be deemed to have been received when delivered.
5
9. No Shareholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Payee or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of the Company or any other matters or any rights
whatsoever as a stockholder of the Company; and no dividends or other
distributions shall be payable or accrued in respect of this Note or the
interest represented hereby or the Conversion Shares obtainable hereunder until,
and only to the extent that, this Note shall have been converted into Common
Stock.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without giving effect to any
conflicts of law principles.
11. WAIVER OF JURY TRIAL. THE COMPANY, BY EXECUTION HEREOF, AND THE PAYEE,
BY ACCEPTANCE HEREOF, MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL BY JURY
OF ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR ARISING IN THE
FUTURE, INCLUDING WITHOUT LIMITATION, ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENER'S CLAIMS WHETHER
ARISING FROM OR RELATED TO THE NEGOTIATION, EXECUTION AND PERFORMANCE OF THE
TRANSACTIONS TO WHICH THIS NOTE RELATES.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK
6
IN WITNESS WHEREOF, the Company has caused this Note to be executed on the day
and year first above written.
HAND BRAND DISTRIBUTION, INC.
By: _________________________________________
Name: ______________________________________
Its: __________________________________________
7
EXHIBIT "A"
INSTRUCTIONS TO CONVERT
The undersigned hereby surrenders the attached Convertible Promissory Note due
__________, January 15, 2005 (the "Note") of Hand Brand Distribution, Inc., a
Florida corporation ("Company"), in the principal amount of $_______ for
conversion into shares of Company's restricted Common Stock ("Common Stock") in
accordance with Section 3 of the Note relating to voluntary conversion, as noted
below. Such Note was issued pursuant to that certain (i) Convertible Note
Agreement dated ______, 2002 with the Company (the "Note Agreement"), and the
(ii) Subscription Agreement dated _____, 200_ with the Company (the
"Subscription Agreement" and together with the Note Agreement, the
"Agreements"). The undersigned represents that he/she/it is the beneficial owner
and Payee of record of the Note, and that no other person has any lien, security
interest or interest of any kind in the Note and that he/she/it has full and
legal right to surrender the Note for conversion. The undersigned further renews
as to the shares of Common Stock to be issued to the undersigned pursuant to
these instructions the representations and warranties set forth in the
Agreements.
( ) The Undersigned elects to convert the Note in full including the
remaining principal of $__________ and accrued interest of $________,
which equals a conversion of $_____________.
( ) The Undersigned elects to convert the Note in part equal to a
principal amount of $__________ and accrued interest of $________,
which equals a conversion of $_____________. An identical Note shall be
reissued for the amount of remaining principal.
Dated this _______ day of _____________________, ________.
In the presence of:
--------------------------------------
Witness
-----------------------------------------------
Signature of Note Payee
Signature guarantee:
Signature must be guaranteed by a commercial bank
or member firm of the New York Stock Exchange.
8
--------------------------------------------------------------------------------
HAND BRAND DISTRIBUTION, INC.
--------------------------------------------------------------------------------
CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT
NAME OF SUBSCRIBER:
-----------------------------------------------------
SUBSCRIPTION AMOUNT:
-----------------------------------------------------
STATE OF RESIDENCE:
-----------------------------------------------------
1. SUBSCRIPTION. The undersigned hereby subscribes to the Notes set forth
above of the Convertible Notes (the "Investment Securities") of Hand
Brand Distribution, Inc. a corporation organized and existing under the
laws of the State of Florida (the "Company"), and agrees to pay for
such Investment Securities the amount set forth above in cash or by
check subject to collection upon execution of this subscription
agreement.
2. ADOPTION OF TERMS. The undersigned understands, accepts and agrees to
be bound by the terms of this offering as contained in the offering
memorandum to which this subscription agreement relates.
3. AGREEMENTS AND UNDERSTANDINGS OF THE UNDERSIGNED. The undersigned
agrees and understands that:
3.1. The undersigned is entitled to full information about the
Company and its principals. Written materials describing the
Company and the Investment Securities (the "Investment
Documents") have been furnished to the undersigned prior to
execution of this subscription agreement and the undersigned
has been given the time required to read such materials, alone
or with the undersigned's advisor(s).
3.2. If the undersigned has made any deposit, escrow or other
payment in whole or in part toward the purchase of the
Investment Securities offered hereby before executing this
subscription agreement, the undersigned may elect to either:
(i) ratify the undersigned's investment and receive a credit
in full for such payment by execution of this subscription
agreement; or (ii) have returned on demand the full amount of
such payment, less distributions received by the undersigned,
if any, plus lawful interest, at which time the undersigned
will have no interest in or further obligation in regard to
the Investment Securities offered hereby.
3.3. The undersigned (or the entity for which the undersigned is
acting, if any) will not offer or sell all or any part of the
undersigned's Investment Securities until and unless the
Investment Securities are registered under the Securities Act
of 1933, as amended and under applicable state laws or unless
the undersigned has delivered to the Company an opinion of
counsel satisfactory to it that such registration is not
required.
3.4. No federal or state agency has made any finding or
determination as to the fairness for investment, nor
recommendation or endorsement, of the Investment Securities.
9
3.5. If the undersigned is neither a United States citizen nor a
resident of the United States, then the undersigned agrees:
(a) to supply the Company with any and all information
necessary so that the Company may satisfy any and all United
States legal reporting requirements; and (b) to indemnify the
Company for any liability incurred by the Company as a result
of its failure to withhold any taxes or comply with any
reporting requirements because the undersigned did not provide
the necessary information to the Company to enable it to
withhold the necessary taxes or fully comply with such
requirements. Furthermore, if the undersigned is a foreign
investor who fails to timely file appropriate and required
forms with us, the undersigned agrees, at the request of the
Company, to execute any and all documents and instruments
requested by the Company in order to consummate a sale or
disposition of the Investment Securities as required to comply
with law.
3.6. If the undersigned is an organization (other than a
cooperative described in Section 521 of the Internal Revenue
Code of 1986, as amended) whose income from the Company will
be exempt from United States income tax, the undersigned shall
so advise the Company.
3.7. THE OFFERING OF THESE SECURITIES IS NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. AS SUCH THE UNDERSIGNED
MUST BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME BECAUSE THE SECURITIES CANNOT BE
SOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. RESTRICTIONS WILL BE PLACED ON THE TRANSFERABILITY
OF THE SECURITIES.
3.8. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
STATE OR JURISDICTION OF THE UNDERSIGNED'S RESIDENCE NOR HAS
THE STATE OR JURISDICTION OF THE UNDERSIGNED'S RESIDENCE
PASSED UPON THE ACCURACY OR ADEQUACY OF ANY INFORMATIONAL
MATERIALS.
3.9. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF ANY INFORMATIONAL
MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
4. WARRANTIES OF THE UNDERSIGNED. The undersigned personally represents
and warrants that:
4.1. The undersigned has reached the age of majority in the state
or country in which the undersigned resides.
4.2. The undersigned (or the entity for which the undersigned is
acting, if any) intends to retain indefinitely, and has no
present arrangement, understanding or agreement for disposing
of the Investment Securities and takes such Investment
Securities solely for the account of the name(s) which appear
below.
4.3. If a trust, corporation, partnership, or other entity, the
undersigned: (i) is duly organized and validly existing under
the laws of the state of formation; (ii) is duly authorized
and empowered to purchase the Investment Securities; (iii) was
not organized exclusively for the purpose of acquiring the
Investment Securities and has an independent reason for
existence beyond such investment; (iv) has duly authorized the
10
signatory hereto to execute this subscription agreement on
behalf of the undersigned, and, upon such execution, the
subscription agreement and any related documents shall be a
binding obligation of the undersigned; and (v) will, upon
request of counsel to the Company, furnish evidence of the
representations and warranties made herein, including
certified copies of the certificate (articles) of
incorporation, articles of (limited) partnership, or other
creating or implementing documents.
4.4. The undersigned is an Accredited Investor (described
hereinafter) under Regulation D of the General Rules and
Regulations of the Securities and Exchange Commission, and
either alone or with an advisor(s), has such knowledge and
experience in financial and business matters that the
undersigned is capable of evaluating the merits and risks of
the prospective investment.
4.5. It has been called to the undersigned's attention that this
investment involves a high degree of risk, and no assurances
are or have been made regarding the economic advantages, if
any, which may inure to the benefit of investors. The economic
benefit from an investment in the Investment Securities
depends on the ability of the Company to successfully conduct
its business activities. The accomplishment of such goals in
turn depends on many factors beyond the control of the Company
or its management. Accordingly, the suitability for any
particular investor of a purchase of the Investment Securities
will depend upon, among other things, such investor's
investment objectives and such investor's ability to accept
speculative risks, including the risk of a total loss of
investment in the Investment Securities. The undersigned and
the undersigned's advisor(s), if any, have carefully reviewed
and understand the risk of, and other considerations relating
to, a purchase of the Investment Securities.
4.6. The undersigned is able to bear the economic risks of this
investment, is able to hold the Investment Securities for an
indefinite period of time, and has sufficient net worth to
sustain a loss of the entire investment in the Company in the
event such loss should occur.
4.7. The undersigned and the undersigned's advisor(s), if any, have
relied only upon the information contained in the Investment
Documents made available to the undersigned and the
undersigned's advisor(s). Any other information concerning
this offering, whether oral or written, may be incomplete or
inaccurate. Only the Investment Documents are intended to be a
complete description of the offering and its terms.
4.8. The Company has answered all inquiries that the undersigned
and the undersigned's advisor(s), if any, have made of it
concerning the Company or any other matters relating to the
business and proposed operation of the Company and the offer
and sale of the Investment Securities. No oral statement,
printed material, or inducement which is contrary to the
information contained in the Investment Documents has been
given or made by or on behalf of the Company to the
undersigned or the undersigned's advisor(s), if any.
4.9. All of the representations and information provided by the
undersigned in this subscription agreement and any additional
information which the undersigned has furnished to the Company
with respect to the undersigned's financial position and
business experience is accurate and complete as of the date
that this subscription agreement was executed by the
undersigned. If there should be any material adverse change in
representations or information prior to the sale of the
Investment Securities subscribed for herein to the
undersigned, the undersigned will immediately furnish accurate
and complete information concerning any such material change
to the Company.
11
4.10. The undersigned represents, if the undersigned is subject to
the Employee Retirement Income Security Act of 1974 ("ERISA"),
that in making the proposed investment the undersigned is
aware of and has taken into consideration the diversification
requirements of Section 404(a)(1)(C) of ERISA, and has
concluded that the proposed investment is a prudent one.
5. "NON-RESIDENT ALIEN" STATUS (IF APPLICABLE). If so indicated below, the
undersigned represents and warrants that the undersigned (or the entity
for which the undersigned is acting, if any) is not a citizen of the
United States or Canada and is not, and has no present intention of
becoming, a resident of the United States (defined as being any natural
person physically present within the United States for at least 183
days in a 12-month consecutive period or any entity who maintained an
office in the United States at any time during a 12-month consecutive
period). The undersigned understands that the Company may rely upon the
representations and warranties of this paragraph as a basis for an
exemption from registration of the Investment Securities under the
Securities Act of 1933, as amended, and the provisions of relevant
state securities laws.
6. "ACCREDITED INVESTOR" STATUS. The undersigned falls within one of the
following definitions of Accredited Investor:
FOR INDIVIDUALS:
[ ] The undersigned is a natural person whose individual net worth, or
joint net worth with spouse, exceeds $1,000,000 at the time of purchase
of the Investment Securities.
[ ] The undersigned is a natural person who had an individual income in
excess of $200,000 in each of the last two years or joint income with
spouse in excess of $800,000 in each of those years and reasonably
expects to reach the same income level in the current year.
[ ] The undersigned is either a director, executive officer or general
partner of the Company, or a director, executive officer or general
partner of a general partner of the Company.
The undersigned further certifies that: (i) the undersigned (or the
undersigned's professional advisor(s)) has the capacity to protect the
undersigned's interests in this investment; (ii) the undersigned is able to bear
the economic risks of this investment; and (iii) the amount of the investment
does not exceed 10% of the undersigned's net worth or joint net worth with
spouse.
FOR ENTITIES:
[ ] The undersigned is an institutional investor as provided in Regulation
Section 230.501(a)(1) under the Securities Act of 1933.
[ ] The undersigned is a private business development company within the
meaning of Section 202(a)(22) of the Investment Advisers Act of 1940.
[ ] The undersigned is any organization described in Section 501(c)(3) of
the Internal Revenue Code, not formed for the specific purpose of
acquiring the Investment Securities, with total assets in excess of
$2,000,000.
12
[ ] The undersigned is a trust with total assets in excess of $2,000,000,
not formed for the special purpose of acquiring the Investment
Securities, whose investment is directed by a person described in
Regulation Section 230.506(b)(2)(ii) under the Securities Act of 1933.
[ ] The undersigned is an entity owned entirely by any of the persons
described above.
7. ACCEPTANCE AND CONDITIONS OF INVESTMENT.
The undersigned agrees and is aware that:
7.1. The Company reserves the unrestricted right to reject any
subscription, and no subscription will be binding unless and
until accepted by it.
7.2. A legend in substantially the following form will be placed on
any certificate(s) evidencing the Investment Securities:
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY ANY
INVESTOR TO ANY OTHER PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE LAW OF THE STATE OR
JURISDICTION WHERE SOLD, TRANSFERRED OR DISPOSED OF, UNLESS SUCH SALE, TRANSFER
OR DISPOSITION SHALL QUALIFY UNDER AN ALLOWED EXEMPTION TO SUCH REGISTRATION.
7.3. Stop transfer instructions will be placed with respect to the
Investment Securities so as to restrict resale or other
transfer thereof subject to further items hereof, including
the provisions of the legend set forth above.
7.4. Unless otherwise provided by law, the legend and stop transfer
instructions described above will be placed with respect to
any new certificate(s) or other document(s) issued upon
presentment by the undersigned of certificate(s) or other
document(s) for transfer.
8. ACCURACY OF INFORMATION GIVEN. The undersigned certifies that the
undersigned has given the information contained herein to the best of
the undersigned's knowledge and answers thereto are complete and
accurate. The undersigned agrees that the foregoing representations and
warranties shall survive the purchase of the Investment Securities as
well as any acceptance of this subscription for the Investment
Securities.
9. ELECTION OF PURCHASER REPRESENTATIVE. The undersigned understands that
the undersigned is entitled to be advised by a purchaser representative
or an equivalent advisor in making a decision to invest and that the
undersigned must be so advised if the undersigned does not have
sufficient knowledge and experience in financial and business matters
to evaluate the merits and risks of this investment.
10. INDEMNIFICATION. The undersigned acknowledges that the undersigned
understands the meaning and legal consequences of the representations
and warranties hereof, and hereby agrees to indemnify and hold harmless
the Company, its affiliates, attorneys, accountants, agents, employees
and any selling security holder from and against any and all loss,
damage or liability, including, without limitation, reasonable
attorneys fees incurred as a result of such breach, due to or arising
out of a breach of any such representations or warranties. This
indemnification shall not require that the Company shall have been
determined by any federal, state or other authority or person to have
qualified for any exemption from the registration provisions of federal
or state securities laws, rules or regulations.
13
11. ARBITRATION. The undersigned hereby agrees that any and all claims
(other than claims for injunctive or other equitable relief) now or at
any time hereafter as to which the Company, its affiliates, attorneys,
accountants, agents or employees and the undersigned, the undersigned's
successors or assigns may be adverse parties, whether arising out of
this agreement or from any other cause, will be resolved by arbitration
before the American Arbitration Association. Each party irrevocably
consents to subject matter and personal jurisdiction before the
American Arbitration Association. The parties covenant that under no
conditions will any of them file any action at law against any other or
bring any claim in any forum other than before the American Arbitration
Association, and they agree that any litigation, if filed, shall be
immediately dismissed upon application and shall be referred for
arbitration hereunder with costs and attorneys' fees to the prevailing
party. The situs of arbitration and any counterclaims shall be selected
by the person against whom arbitration is sought provided that such
situs is within the United States and is the situs of such person's
principal residence or place of business. Any dispute concerning situs
shall be determined by the American Arbitration Association.
The parties shall restrict themselves to claims for compensatory
damages. No claims shall be made by any party for lost profits, punitive or
similar damages. The parties agree that any award or decision by the American
Arbitration Association shall be final and non-appealable except as to errors of
law. Any appeal from an award of the arbitrator shall be taken to the
appropriate court having jurisdiction over the situs of the arbitration. No bond
shall be required of any party on appeal, and no enforcement of the award shall
be granted until a determination of the appeal is final or until time to take an
appeal has expired. Each party shall pay their own attorneys fees and costs of
the arbitration and any appeal.
It is the intent of the parties and their affiliates to deal with all
disputes between them by arbitration to the maximum degree allowed by law
(including claims against any party's current or former attorneys, accountants,
agents, employees, successors or assigns, if such person agrees to arbitration
on the terms contained herein), and if any claim or claims should be held not
subject to arbitration, only such claim or claims shall be excluded from this
paragraph.
14
--------------------------------------------------------------------------------
HAND BRAND DISTRIBUTION, INC.
--------------------------------------------------------------------------------
SIGNATURE PAGE TO CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT
----------------------------------------------------------------------------
Name of Subscriber
----------------------------------------------------------------------------
Xxxxxx
----------------------------------------------------------------------------
Xxxx, Xxxxx, Zip Code
$
--------------------------------------------------------------------------
Amount of Subscription
By_________________________________________________________________________
Signature
Date:________________________________________________________________________
Taxpayer Identification Number _________________________________________________
(Social Security number for individuals)
STATUS (if not individual):
( ) Trust ( ) Corporation
( ) Partnership ( ) Other _______________________________
( ) XXX (describe)
TITLE TO BE TAKEN BY (if not individual):
( ) Joint Tenant with
-----------------------------------------------------------------------------
(name of co-tenant)
( ) Other (describe):___________________________________________
--------------------------------------------------------------------------------
_____ CHECK HERE IF YOU ARE AN ACCREDITED INVESTOR AS DEFINED IN PARAGRAPH 6.
_____ CHECK HERE IF YOU ARE NOT AN ACCREDITED INVESTOR AS DEFINED IN
PARAGRAPH 6.
_____ CHECK HERE IF YOU ARE NOT A CITIZEN OR RESIDENT OF THE UNITED STATES
OR CANADA.
--------------------------------------------------------------------------------
Accepted:
HAND BRAND DISTRIBUTION, INC.
By______________________________________________
Date:___________________________________________
