EXHIBIT 10.1
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE (COLLECTIVELY
WITH THIS NOTE, THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAW, AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED,
UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR
UPON DELIVERY TO THE ISSUER OF THE SECURITIES OF AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THE SECURITIES THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS PURSUANT TO AVAILABLE EXEMPTIONS THEREFROM. THE TRANSFER OF THE SECURITIES
REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS HEREOF.
XXXXXXXXX.XXX INC.
UNSECURED CONVERTIBLE PROMISSORY NOTE
$[_______] DALLAS, TEXAS
[____________], 2004
Xxxxxxxxx.xxx Inc., a Delaware corporation (the "COMPANY"), for value
received, hereby promises unconditionally to pay to [NAME OF NOTE HOLDER], or
his or her permitted transferees or assigns (collectively, the "HOLDER"), in
immediately available and lawful money of the United States of America
("DOLLARS" or "$"), the principal amount of [______________] Dollars
($[________]) (the "PRINCIPAL"), plus any accrued and unpaid Interest thereon,
on the Maturity Date (as such terms are defined below).
THIS UNSECURED CONVERTIBLE PROMISSORY NOTE (THIS "NOTE") IS ISSUED TO
THE HOLDER IN CONNECTION WITH THE ISSUANCE BY THE COMPANY, FROM TIME TO TIME ON
OR PRIOR TO [SEPTEMBER 30, 2004], OF SUBSTANTIALLY IDENTICAL UNSECURED
CONVERTIBLE PROMISSORY NOTES, PROVIDED THAT SUCH OTHER PROMISSORY NOTES MAY VARY
AS TO THEIR PRINCIPAL AMOUNTS AND THE DATES OF ISSUANCE THEREOF, WHICH OTHER
PROMISSORY NOTES, IN THE AGGREGATE TOGETHER WITH THIS NOTE, ARE NOT GREATER IN
PRINCIPAL AMOUNT THAN $400,000 (SUCH OTHER UNSECURED CONVERTIBLE PROMISSORY
NOTES, COLLECTIVELY WITH THIS NOTE, THE "INVESTOR NOTES", AND THE HOLDERS OF
SUCH INVESTOR NOTES, COLLECTIVELY WITH THE HOLDER, THE "INVESTORS"). THE
FOLLOWING IS A STATEMENT OF THE RIGHTS OF THE HOLDER AND THE CONDITIONS TO WHICH
THIS NOTE IS SUBJECT, AND TO WHICH THE HOLDER, BY THE ACCEPTANCE OF THIS NOTE,
AGREES.
1. CERTAIN DEFINITIONS; CERTAIN INTERPRETATIONS.
1.1. CERTAIN DEFINITIONS. As used herein, the following terms
shall have the following meanings:
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
a legal holiday in the State of Texas.
"COMMON STOCK" means the common stock, par value $0.001 per
share, of the Company. "CONVERSION PRICE" means $0.40 per share, subject to
adjustment as provided in this Note.
"CONVERSION SECURITIES" means the shares of Common Stock
issuable upon conversion of this Note in accordance with Sections 5.1 and
5.2(d).
"EVENT OF DEFAULT" shall have the meaning assigned to such
term in Section 4.
"INTEREST" shall have the meaning assigned to such term in
Section 2.2.
"INVESTORS" shall have the meaning assigned to such term in
the Preamble.
"INVESTOR NOTES" shall have the meaning assigned to such term
in the Preamble.
"ISSUE DATE" means the first date written above, which is the
date of execution and issuance of this Note.
"MATURITY DATE" means September __, 2007.
"PERSON" means any individual, corporation, limited liability
company, partnership, limited partnership, limited liability partnership, firm,
joint venture, association, joint stock company, trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
1.2. CERTAIN INTERPRETATIONS. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference to any law, rule or regulation herein shall be construed as
referring to any amendment or modification of such law, rule or regulation, (c)
any reference herein to any Person shall be construed to include such Person's
permitted successors and assigns, (d) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Note in its entirety and not to any particular provision hereof, (e) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement, except as otherwise expressly provided, and (f) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
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2. REPAYMENT.
2.1. PRINCIPAL. Unless earlier paid, converted or accelerated
in accordance with the provisions hereof, the entire outstanding Principal shall
be due and payable on the Maturity Date. Promptly following the payment in full
of this Note, the Holder shall surrender this Note to the Company for
cancellation.
2.2. INTEREST. Interest on the unpaid Principal ("INTEREST")
during the period from the Issue Date through the Maturity Date, shall accrue at
a rate of seven percent (7%) PER ANNUM, non-compounding. Interest shall be
computed on the basis of a 365-day year applied to actual days elapsed. Unless
the Interest on this Note is earlier paid, converted or accelerated in
accordance with the provisions hereof, all Interest then accrued and unpaid
shall be due and payable in cash on the Maturity Date (concurrently with the
payment of Principal as provided in Section 2.1).
2.3. LOCATION AND EXTENSION OF TIME FOR REPAYMENTS. All
payments (including any prepayments) of Principal, Interest and other amounts
due and payable by the Company pursuant to this Note shall be paid to the Holder
at such Holder's address for notice pursuant to Section 7.8. If the outstanding
Principal and Interest become due and payable on any day other than a Business
Day, the payment date thereof (including, without limitation, the Maturity Date)
shall be automatically extended to the next succeeding Business Day, and to such
payable amounts shall automatically be added the Interest which shall have
accrued during such extension period at the rate per annum herein specified.
3. PREPAYMENTS.
3.1. OPTIONAL PREPAYMENT. Outstanding amounts under this Note
may be prepaid, in whole or in part, at any time at the option of the Company
upon at least thirty days' prior written notice to the Holder (a "PREPAYMENT
Notice"), which Prepayment Notice shall set forth the amount of Principal and
Interest to be prepaid by the Company and the date thereof; PROVIDED, that, such
prepayment is made substantially simultaneously and PARI PASSU with prepayment
of the other Investor Notes, in each case, as provided in Section 3.2.
3.2. APPLICATION OF PREPAYMENTS. Prepayments made by the
Company pursuant to this Section 3 shall be applied as follows:
(i) First, to repayment of accrued and unpaid
interest on the Investor Notes, PRO RATA based on each Investor's share
of the aggregate amount of accrued interest then owed to the Investors
under all Investor Notes; and
(iii) Second, to repayment of the unpaid principal
under the Investor Notes, PRO RATA based on each Investor's share of
the aggregate principal amount then owed to the Investors under all
Investor Notes.
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3.4. NO PREMIUMS, PENALTIES OR CONSENT. No premium or penalty
shall be payable, and no consent of the Holder or the other Investors shall be
required, in connection with any prepayment of this Note or other Investor
Notes.
4. EVENTS OF DEFAULT.
If one or more of the following events shall have occurred and
be continuing (each, an "EVENT OF DEFAULT"):
(a) the Company shall fail to pay within ten (10) days of when
due any principal of, or accrued interest on, this Note or any of the other
Investor Notes;
(b) the Company shall consummate the sale of all or
substantially all of its assets, or liquidate, dissolve or wind up;
(c) the Company shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall take any corporate action to authorize any of the
foregoing; or
(d) an involuntary case or other proceeding shall be commenced
against the Company seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed for a period of sixty (60) days; or an order for relief shall be
entered against the Company under the federal bankruptcy laws as now or
hereafter in effect.
THEN, and in each and every such Event of Default, the Holder may, by written
notice to the Company, declare this Note to be, and this Note shall thereupon
become, immediately due and payable in full without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Company;
PROVIDED, HOWEVER, that in the case of any of the Events of Default specified in
clauses (c) or (d) above, without any notice to the Company or any other act by
the Holder or the other Investors, this Note shall become immediately due and
payable in full without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company.
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5. CONVERSION.
5.1. CONVERSION. At the option of the Holder, exercised in
accordance with this Section 5, at any time or from time to time prior to the
Maturity Date, all or any portion of the outstanding Principal and Interest
shall be converted into a number of shares of Common Stock equal to the quotient
obtained by dividing (i) the aggregate Principal and Interest then outstanding
by (ii) the Conversion Price. Notwithstanding anything herein to the contrary,
Holder shall have the right to exercise its conversion rights hereunder after
receipt of a Prepayment Notice and on or prior to the date of any such
prepayment by the Company in accordance with such Prepayment Notice.
5.2. ADJUSTMENT OF CONVERSION PRICE. (a) In case the Company
shall at any time issue shares of Common Stock for no consideration by way of
dividend or other distribution on the outstanding Common Stock of the Company or
subdivide or combine the outstanding shares of Common Stock of the Company, the
Conversion Price shall forthwith be proportionately decreased in the case of
such dividend, distribution or subdivision, or increased in the case of
combination and, in either case, rounded up or down to the nearest one cent. An
adjustment made pursuant to this Section 5.2 shall become effective when such
dividend, distribution, subdivision or combination, as the case may be, is
actually made or becomes effective.
(b) No adjustment in the Conversion Price or in the number of
shares of Common Stock issuable upon conversion pursuant to Section 5.1 shall be
made by reason of the issuance in exchange for cash, property or services of
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock, or carrying the right to purchase any of the
foregoing.
(c) In case of any reorganization, recapitalization or
reclassification of the Company or the outstanding Common Stock or in the case
of any consolidation or merger of the Company with another entity as a result of
which the Company is not the surviving entity, or in the case of any sale of
all, or substantially all, of its property, the Holder shall instead thereafter
have the right pursuant to Section 5.1 to convert the outstanding Principal and
Interest under this Note into the kind and amount of shares of stock or other
securities or property receivable upon such reorganization, reclassification,
consolidation, merger or sale by a holder of the number of shares of Common
Stock which the Holder would have had the right to convert this Note into
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, at a price equal to the Conversion Price then in effect
pertaining to this Note (the kind, amount and price of such stock or other
securities or property to be subject to subsequent adjustment as provided in
this Section 5.2). Notwithstanding anything contained herein to the contrary, no
adjustment of the Conversion Price shall be made by reason of the issuance of
Common Stock or other securities pursuant to the acquisition by the Company of
all or substantially all of the stock, other securities or property of any other
entity.
(d) Irrespective of any adjustments in the Conversion Price,
this Note and any replacement notes theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in this Note.
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5.3. MECHANICS OF CONVERSION. If the Holder determines to
convert all or any portion of this Note pursuant to Section 5.1, the Holder
shall (i) notify the Company, in writing, at least three (3) Business Days prior
to the contemplated date, of the Holder's election to convert all or any portion
of this Note, and (ii) surrender this Note for cancellation, duly endorsed, at
the office of the Company, or at such other place designated by the Company.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of the surrender of this Note as provided in the
immediately preceding sentence.
5.4. ISSUANCE OF CERTIFICATES; ISSUANCE TAX. Promptly upon
conversion of any outstanding Principal and Interest, the Company shall issue to
the Holder certificates representing the number of shares of Common Stock into
which such Principal and Interest, have been converted. Upon conversion of an
amount less than the total outstanding Principal and Interest then, subject to
Section 5.5, the Company shall issue to the Holder a duly authorized, validly
issued replacement note evidencing the portion of the outstanding Principal and
Interest that was not so converted. The issuance of certificates for Conversion
Securities or a replacement note shall be made without charge to the Holder for
any issuance tax in respect thereof, if any, other than taxes in connection with
the issuance of a certificate for Conversion Securities in the name of any
Person other than the Holder.
5.5. NO FRACTIONAL SHARES; RELEASE OF OBLIGATIONS UNDER NOTE.
No fractional Conversion Securities shall be issued upon conversion of the
outstanding Principal and Interest under this Note; rather, the Company shall
round the number of Conversion Securities to be issued to the nearest whole
number. Upon conversion or payment in full of the outstanding Principal and
Interest and any other amounts due and payable under this Note and the issuance
of any securities or other property issuable in connection with the conversion
hereof, the Company shall be forever released from all of its obligations,
undertakings and liabilities under this Note.
6. REPLACEMENT OF NOTE.
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of this Note, and in case of loss,
theft or destruction, of indemnity reasonably satisfactory to it (with or
without requirement of a surety bond in the Company's sole discretion), and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
(if mutilated) upon surrender and cancellation of this Note, the Company shall
make and deliver to the Holder a new promissory note of like tenor in lieu of
this Note. Any replacement promissory note made and delivered in accordance with
this Section 6 shall be dated as of the date hereof.
7. MISCELLANEOUS.
7.1. SURVIVAL. All agreements and covenants contained in this
Note shall survive the execution hereof and shall remain in full force and
effect until the earlier to occur of (i) the payment in full of all outstanding
Principal and Interest, and any other amounts due and payable, under this Note,
and (ii) the conversion of all outstanding Principal and Interest under this
Note, if applicable, into Conversion Securities in accordance with Section 5.
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7.2. ASSIGNMENT. The Holder may not assign or otherwise
dispose of this Note or the rights and obligations hereunder (including by
operation of law) without the prior written consent of the Company.
Notwithstanding anything to the contrary in the foregoing, this Note may not be
assigned or otherwise disposed of by the Holder unless (i) registered under the
Securities Act and applicable state securities laws or (ii) the Company receives
an opinion of counsel to the proposed transferor in form and substance
satisfactory to the Company, to the effect that such proposed assignment or
other disposition is exempt from the registration requirements of the Securities
Act and applicable state securities laws. Any instrument purporting to make an
assignment or other disposition in violation of this Section 7.2 shall be void.
7.3. BENEFITS OF NOTE. The terms and provisions of this Note
shall be binding upon the successors, assigns, heirs, executors and
administrators of the Company and the Holder and shall inure to the benefit of,
and be enforceable by, each Person who shall be a registered holder of this Note
from time to time. The Holder shall have no rights as a member of the Company
solely by virtue of the ownership of this Note.
7.4. SEVERABILITY. In case any provision of this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.5. FURTHER ASSURANCES. The Holder agrees to execute such
other documents, instruments, agreements and consents, and take such other
actions as may be reasonably requested by the Company hereto to effectuate the
purposes of this Note.
7.6. AMENDMENT AND WAIVER. The terms and provisions of this
Note may only be modified, amended or waived in writing signed by the Company
and the Holder. All modifications, amendments, waivers and consents shall be
effective only in the specific instance for the purpose for which given.
7.7. DELAYS OR OMISSIONS. No delay by the Holder or the
Holder's agents in exercising any powers or rights hereunder shall operate as a
waiver of such power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof, or the exercise of
any other power or right hereunder or otherwise.
7.8. NOTICES. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed facsimile
transmission if sent during normal business hours of the recipient, if not, then
on the next business day, (c) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent as follows:
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IF TO THE COMPANY: Xxxxxxxxx.xxx inc.
00000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Facsimile: (214) ___-____
WITH A COPY TO: Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
IF TO HOLDER: [HOLDER]
[ADDRESS]
Attention: [_______________]
Facsimile: [_______________]
OR, to such other address or facsimile number as the party to whom notice is to
be given may have furnished to the other party in writing in accordance
herewith.
7.9. TITLES AND SUBTITLES. The titles of the sections and
subsections of this Note are for convenience of reference only and are not to be
considered in construing this Note.
7.90. GOVERNING LAW. This Note shall be construed in
accordance with, and governed by, the laws of the State of Delaware (without
giving effect to conflict of laws principles).
7.11. CONSENT TO EXCLUSIVE JURISDICTION AND SERVICE OF
PROCESS. The Company and the Holder each hereby irrevocably and unconditionally
submits to the jurisdiction of the courts of the State of Texas and of the
Federal courts sitting in the State of Texas in any action or proceeding
directly or indirectly arising out of or relating to this Note or the
transactions contemplated hereby (whether based in contract, tort, equity or any
other theory). The Company and the Holder each agrees that all actions or
proceedings arising out of or relating to this Note must be litigated
exclusively in any such court that sits in the County of Dallas, and
accordingly, each party irrevocably waives any objection which he or it may now
or hereafter have to the laying of the venue of any such action or proceeding in
any such court. The Company and the Holder each further irrevocably consents to
service of process in the manner provided for notices in Section 7.8. Nothing in
this Note will affect the right of the Company or the Holder to serve process in
any other manner permitted by law.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused its duly authorized
representative to execute this Note, and the Company has caused this Note to be
issued, each as of the date first set forth above.
XXXXXXXXX.XXX INC.
By:___________________________________
Name:
Title:
SIGNATURE PAGE - UNSECURED CONVERTIBLE PROMISSORY NOTE
