THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THIS SECURITY MAY NOT BE SOLD
OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS.
PROMISSORY NOTE
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(▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇)
$75,000.00 ORLANDO, FLORIDA
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SEPTEMBER 30, 2004
FOR VALUE RECEIVED, SEQUIAM CORPORATION, a California corporation ("Maker"),
hereby promises to pay to the order of ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Holder"), or any
subsequent Holder of this Note (the "Note") at such location as Holder shall
designate by written notice to Maker, the principal sum of Five Hundred Thousand
Dollars ($75,000), with interest from the date such principal amount was
received by Maker until the date paid.
1. Interest. The principal balance of this Note outstanding from time
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to time shall bear interest from the date such principal amount was received by
Maker at five percent (5%), compounded every thirty (30) days, until paid in
full. Such interest shall be calculated on the basis of a three hundred
sixty-five (365) day year, actual number of days elapsed.
2. Payment. The outstanding principal balance, together with any and
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all accrued unpaid interest and any other amounts due and owing under this Note,
shall be due and payable on the date (the "Maturity Date") that is six months
from the date of this Note. All payments hereunder shall be due and payable in
lawful money of the United States of America and without setoff, deduction or
counterclaim of any kind whatsoever. Unless otherwise specifically provided
herein, all payments hereon shall be applied first to interest and then to
principal.
3. Warrants. Upon receipt of the principal amount of this Note, Maker
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shall issue to Holder a warrant (the "Warrant") to purchase One Hundred Ninety
Five Thousand (195,000) shares of common stock of Maker at a purchase price of
$0.66 per share, at any time during the "Exercise Period" (defined below). As
used herein, the "Exercise Period" shall mean the period beginning on September
30, 2004 and expiring on September 30, 2009.
4. Prepayment. Maker may at any time prepay this Note, in whole or in
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part, without fee, charge, premium or penalty. Holder shall apply payments to
the outstanding principal, interest and other amounts due hereunder in any
manner determined, in ▇▇▇▇▇▇'s sole and absolute discretion.
5. Disbursements. Loan proceeds of $75,000 will be disbursed on
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September 30, 2004 (the "Execution Date").
6. Use of Proceeds. Loan proceeds from the principal amount of this
------------------
Note will not be used to pay accrued officers' salaries or shareholder loans.
7. Piggy-back Registration Rights. In the event that from the period
--------------------------------
beginning on the Execution Date and continuing for a period of twelve (12)
months thereafter, Maker shall file a registration statement with the SEC
registering the sale or resale of any of Maker's debt or equity securities,
Maker shall also include in such registration statement the shares of common
stock to be issued upon exercise of the warrants as described in Section 3
above.
It shall be a condition precedent to the obligations of Maker to take any action
pursuant to this Section 7 that the Holder shall furnish to Maker such
information regarding itself, the securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of Holder's common stock.
Maker shall bear and pay all expenses incurred in connection with any
registration, filing or qualification of the common stock with respect to the
registrations pursuant to the Section 7 for the Holder, including (without
limitation) all registration, filing and qualification fees, printers' and
accounting fees relating or apportionable thereto, but excluding underwriting
discounts and commissions relating to the sale of the common stock.
8. Terms. As long as this Note remains outstanding, Maker agrees that:
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(a) if it enters into a subsequent debt financing with a non-affiliated third
party lender; and (b) such subsequent debt financing contains terms and
conditions which are more favorable to the non-affiliated third party lender
than the terms and conditions set forth in this Note (the "Improved Terms"),
then the terms and conditions of this Note shall, simultaneously with the
closing of such subsequent financing, be adjusted to reflect the Improved Terms.
9. Representations Regarding Private Placement. Holder hereby
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represents and warrants to Maker, with the intent that the Maker will rely
thereon in making and delivering the Note, the Warrant, and the shares of common
stock to be issued upon the exercise of the Warrant, that as of the date of this
Note and as of each date the Warrant, or any portion thereof, is exercised:
(a) Accredited Investor. The Holder, and each of the beneficiaries for
-------------------
whom the Holder is purchasing the Note and the Warrant and the shares of Common
Stock to be issued upon the exercise of the Warrant (collectively, the
"Securities"), is an "accredited investor" as that term is defined in Regulation
D promulgated under the Securities Act by virtue of being (initial all
applicable responses):
________ A small business investment company licensed by the U.S. Small
Business Administration under the Small Business Investment Company
Act of 1958,
________ A business development company as defined in the Investment Company
Act of 1940,
________ A national or state-chartered commercial bank, whether acting in an
individual or fiduciary capacity,
________ An insurance company as defined in Section 2(13) of the Securities
Act,
________ An investment company registered under the Investment Company Act of
1940,
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________ An employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, where the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, insurance company, or registered investment
advisor, or an employee benefit plan which has total assets in excess
of $5,000,000,
________ A private business development company as defined in Section 202(a)
(22) of the Investment Advisors Act of 1940,
________ An organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation or a partnership with total assets in excess of
$5,000,000,
________ A natural person (as opposed to a corporation, partnership, trust or
other legal entity) whose net worth, or joint net worth together with
his/her spouse, exceeds $1,000,000,
________ Any trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Section
506(b)(2)(ii) of Regulation D,
________ A natural person (as opposed to a corporation, partnership, trust or
other legal entity) whose individual income was in excess of $200,000
in each of the two most recent years (or whose joint income with such
person's spouse was at least $300,000 during such years) and who
reasonably expects an income in excess of such amount in the current
year, or
________ A corporation, partnership, trust or other legal entity (as opposed to
a natural person) and all of such entity's equity owners fall into one
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or more of the categories enumerated above;
(b) Experience. The Holder is sufficiently experienced in financial
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and business matters to be capable of evaluating the merits and risks of its
investments, and to make an informed decision relating thereto, and to protect
its own interests and that of its beneficiaries in connection with the purchase
of the Securities;
(c) Own Account. The Holder is purchasing the Securities as principal
------------
for its own account and that of its beneficiaries. The Holder is purchasing the
Securities for investment purposes only and not with an intent or view towards
furthering sale or distribution (as such term is used in Section 2(11) of the
Securities Act) thereof, and has not pre-arranged any sale with any other
purchaser;
(d) Exemption. The Holder understands that the offer and sale of the
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Securities is not being registered under the Securities Act based on the
exemption from registration provided by Rule 506 promulgated under Section 4(2)
of the Securities Act and that the Company is relying on such exemption;
(e) Importance of Representations. The Holder understands that the
-------------------------------
Securities are being offered and sold to it in reliance on an exemption from the
registration requirements of the Securities Act, and that the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Holder set forth herein in order to
determine the applicability of such safe harbor and the suitability of the
Holder to acquire the Securities;
(f) No Registration. The Securities have not been registered under the
---------------
Securities Act and may not be transferred, sold, assigned, hypothecated or
otherwise disposed of unless such transaction is the subject of a registration
statement filed with and declared effective by the Securities and Exchange
Commission (the "SEC") or unless an exemption from the registration requirements
under the Securities Act, such as Rule 144, is available. The Holder represents
and
3
warrants and hereby agrees that all offers and sales of the Securities shall be
made only pursuant to such registration or to such exemption from registration;
(g) Risk. The Holder acknowledges that the purchase of the Securities
----
involves a high degree of risk, is aware of the risks and further acknowledges
that it can bear the economic risk of the Securities, including the total loss
of its investment;
(h) Current Information. The Holder has been furnished with or has
--------------------
acquired copies of all requested information concerning the Company, including a
copy of the most recent audited financial statements of the Company;
(i) Independent Investigation. The Holder, in making the decision to
--------------------------
purchase the Securities, has relied upon independent investigations made by it
and its purchaser representatives, if any, and the Holder and such
representatives, if any, have prior to any sale to it, been given access and the
opportunity to examine all material contracts and documents relating to this
offering and an opportunity to ask questions of, and to receive answers from,
the Company or any person acting on its behalf concerning the terms and
conditions of this offering. The Holder and its advisors, if any, have been
furnished with access to all materials relating to the business, finances and
operation of the Company and materials relating to the offer and sale of the
Securities which have been requested. The Holder and its advisors, if any, have
received complete and satisfactory answers to any such inquiries;
(j) No Recommendation or Endorsement. The Holder understands that no
----------------------------------
federal, state or provincial agency has passed on or made any recommendation or
endorsement of the Securities;
(k) The Holder. If the Holder is a partnership, corporation or trust,
-----------
the person executing this Note on its behalf represents and warrants that:
(i) he or she has made due inquiry to determine the truthfulness
of the representations and warranties made pursuant to this Note, and
(ii) he or she is duly authorized (and if the undersigned is a
trust, by the trust agreement) to make this investment and to enter into and
execute this Note on behalf of such entity; and
(l) Non-Affiliate Status. The Holder is not an affiliate of the
---------------------
Company nor is any affiliate of the Holder, including any beneficiaries of
Holder, an affiliate of the Company.
10. No Waiver. No delay or omission on the part of Holder in
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exercising any right or remedy under this Note shall operate as a waiver of that
right or remedy on any future occasion or of any other rights under this Note.
11. Attorneys Fees. If Holder institutes any collection effort, of any
--------------
nature whatsoever, for any amount due and payable hereunder following and during
the occurrence of a default, then Maker shall pay to Holder forthwith any and
all reasonable costs and expenses of collection actually incurred by Holder,
including without limitation, reasonable attorneys fees, whether or not suit or
other action or proceeding is instituted.
12. Usury. Notwithstanding any provision of this Note to the contrary,
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the total liability for payments in the nature of interest shall not exceed the
limits imposed by the applicable usury laws of the State of California. If,
from any circumstances whatsoever, fulfillment of any provision hereof or of any
other agreement, evidencing or securing the debt, at the time performance of
such provisions shall be due, shall involve the payment of interest in excess of
that
4
authorized by law, and if from any circumstances, Holder shall ever receive as
interest an amount which would exceed the highest lawful rate applicable to the
Maker, such amount which would be excessive interest shall be applied to the
reduction of the principal balance of the debt evidenced hereby and not to the
payment of interest.
13. Severability. The provisions of this Note are intended by Maker to
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be severable and divisible and the invalidity or unenforceability of a provision
or term herein shall not invalidate or render unenforceable the remainder of
this Note or any part thereof.
14. Amendments. The obligations of Maker and rights of Holder under
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this Note may be waived, altered, amended, modified, or cancelled, in whole or
in part, only by the express written consent of ▇▇▇▇▇▇.
15. Transferability. This Note is not transferable prior to the
---------------
Maturity Date and thereafter without Maker's prior written consent.
16. Governing Law. This Note shall be governed by and construed and
--------------
interpreted in accordance with the internal laws of the State of California,
without giving effect to any principle or doctrine regarding conflicts of laws.
IN WITNESS WHEREOF, each of Maker and ▇▇▇▇▇▇ has executed and delivered this
Note as of the date first written above.
SEQUIAM CORPORATION,
a California corporation
By: _________________________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Senior Vice President
▇▇▇▇▇'S ADDRESS FOR NOTICE:
Sequiam Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
_____________________________________________________
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇'▇ ADDRESS FOR NOTICE:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Lever & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel: ▇▇▇-▇▇▇-▇▇▇▇
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