Contract
EXHIBIT
4.1
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO BIGSTRING CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
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Principal
Amount:
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Issue
Date: June ___, 2009
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FOR VALUE RECEIVED, BIGSTRING
CORPORATION, a Delaware corporation (hereinafter called “Borrower”), hereby
promises to pay to _______________ (the “Holder”), without demand, the sum of
_______________, with simple and unpaid interest thereon, on June ___, 2011 (the
“Maturity Date”), if not paid sooner.
This Note
has been entered into pursuant to the terms of a Subscription Agreement between
the Borrower, the Holder and certain other subscribers of the Borrower’s
convertible notes, dated of even date herewith (the “Subscription Agreement”),
and shall be governed by the terms of such Subscription
Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to
this Note:
ARTICLE
I
GENERAL
PROVISIONS
1.1 Payment Grace
Period. The Borrower shall have a five (5) business day grace
period to pay any monetary amounts due under this Note, after which grace period
and during the pendency of an Event of Default (as defined in Article III) a
default interest rate of fifteen percent (15%) per annum shall apply to the
amounts owed hereunder.
1.2. Interest
Rate. Simple interest payable on this Note shall accrue
at the annual rate of six percent (6%). Accrued interest will be
payable on each annual anniversary of the Issue Date and on the Maturity Date,
accelerated or otherwise, when the principal and remaining accrued but unpaid
interest shall be due and payable. Interest will be payable in cash
or at the election of the Borrower, unless an Event of Default has occurred and
has not been timely cured, by the Borrower’s delivery of either registered
shares of Common Stock or Common Stock which may be resold immediately pursuant
to Rule 144(b)(1)(i) of the Securities Act of 1933, as amended (“Interest
Shares”) valued at the lessor of (i) the Conversion Price in effect on the day
the interest payment is due, or (ii) eighty percent (80%) of the three lowest
closing bid prices as reported by Bloomberg L.P. for the Principal
Market for the five trading days preceding the
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payment
due date. In no event may Interest Shares be paid by the Borrower to
the extent such Interest Shares would exceed the limitation set forth in Section
2.3 of this Note.
1.3. Conversion
Privileges. The conversion rights of the Holder as set forth
in Article II of this Note shall remain in full force and effect immediately
from the date hereof and until the Note is paid in full regardless of the
occurrence of an Event of Default. The principal amount of the Note
and the remaining accrued but unpaid interest shall be payable in full on the
Maturity Date, unless previously paid or converted into Common Stock in
accordance with Article II hereof.
ARTICLE
II
CONVERSION
RIGHTS
The
Holder shall have the right to convert the entire principal amount under this
Note and the accrued but unpaid interest thereon into shares of the Borrower’s
Common Stock as set forth below.
2.1. Voluntary Conversion into
the Borrower’s Common Stock.
(a) The
Holder shall have the right from and after the Issue Date of the issuance of
this Note and then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note (provided that any partial
conversion shall not be for a portion of the principal amount of this Note which
is the lesser of (i) $10,000, or (ii) the remaining balance of the principal
amount of this Note), at the election of the Holder (the date of giving of such
notice of conversion being a “Conversion Date”) into fully paid and
nonassessable shares of Common Stock as such stock exists on the date of
issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b) hereof (the “Conversion Price”), determined
as provided herein. Upon delivery to the Borrower of a completed
Notice of Conversion, a form of which is annexed hereto, Borrower shall issue
and deliver to the Holder within three (3) business days after the Conversion
Date (such third day being the “Delivery Date”) that number of shares of Common
Stock for the portion of the Note converted in accordance with the
foregoing. The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal of the Note to be converted, by the Conversion Price.
(b) Subject
to adjustment as provided for in Section 2.1(c) hereof, the Conversion Price per
share of Common Stock shall be $0.015 (“Conversion Price”).
(c) The
Conversion Price and the number and kind of shares or other securities to be
issued upon conversion of this Note, shall be subject to adjustment from time to
time upon the happening of certain events while this conversion right remains
outstanding, as follows:
X. Xxxxxx, Sale of Assets,
etc. If the Borrower at any time shall consolidate with or
merge into or sell or convey all or substantially all its assets to any other
corporation, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
such number and kind of shares or
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other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision
shall similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the
foregoing, the anti-dilution provisions of this Section shall apply to such
securities of such successor or purchaser or surviving entity of the surviving
corporation after any such consolidation, merger, sale or
conveyance.
B. Reclassification,
etc. If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes of the Borrower’s capital stock that may be
issued or outstanding, this Note, as to the unpaid principal amount thereof and
accrued interest thereon, shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the shares of
Common Stock subject to the conversion of this Note immediately prior to such
reclassification or other change.
C. Stock Splits, Combinations
and Dividends. If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
D. Share
Issuance. So long as this Note is outstanding, if the
Borrower shall issue or agree to issue any shares of Common Stock other than
with respect to any Excepted Issuances for a consideration less than the
Conversion Price in effect at the time of such issue, then, and thereafter
successively upon each such issue, the Conversion Price shall be reduced to such
other lower issue price. For purposes of this adjustment, the
issuance of any security carrying the right to convert such security into shares
of Common Stock or of any warrant, right or option to purchase Common Stock
shall result in an adjustment to the Conversion Price upon the issuance of the
above-described security and again upon the issuance of shares of Common Stock
upon exercise of such conversion or purchase rights if such issuance is at a
price lower than the then applicable Conversion Price. The reduction
of the Conversion Price described in this paragraph is in addition to other
rights of the Holder described in this Note and the Subscription
Agreement.
E. Other Corporate
Events. Prior to the consummation of any
recapitalization, reorganization, consolidation, merger, spin-off or other
business combination pursuant to which holders of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for Common
Stock (a “Corporate Event”), the Borrower shall make appropriate provision to
insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, (i) in addition to the shares of Common Stock
receivable upon such conversion, such securities or other assets to which the
Holder would have been entitled with respect to such shares of Common Stock had
such shares of Common Stock been held by the Holder upon the consummation of
such Corporate Event, or (ii) in lieu of the shares of Common
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Stock
otherwise receivable upon such conversion, such securities or other assets
received by the holders of Common Stock in connection with the consummation of
such Corporate Event in such amounts as the Holder would have been entitled to
receive had this Note initially been issued with conversion rights for the form
of such consideration (as opposed to shares of Common Stock) at a conversion
price for such consideration commensurate with the Conversion
Price. Provision made pursuant to the preceding sentence shall be in
a form and substance reasonably satisfactory to the holders of Notes
representing at least 70% of the aggregate principal amount of the Notes then
outstanding.
(d) Whenever
the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
shall promptly provide notice to the Holder setting forth the Conversion Price
after such adjustment and setting forth a statement of the facts requiring such
adjustment.
(e) The
Borrower will reserve from its authorized and unissued shares of Common Stock,
the number of shares of Common Stock during the time periods and in the amounts
described in the Subscription Agreement. The Borrower represents that
upon issuance, such shares of Common Stock will be duly and validly issued,
fully paid and non-assessable. The Borrower agrees that its issuance
of this Note shall constitute full authority to its officers, agents, and
transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of the
Borrower’s Common Stock upon the conversion of this Note.
2.2 No Fractional
Shares. No fractional shares of Common Stock shall be issued
upon conversion of this Note, but an adjustment in cash will be made, in respect
of any fraction of a share (which will be valued based on the Conversion Price)
which would otherwise be issuable upon the surrender of this Note for conversion
and a check in the amount of the value of such fractional share shall be
delivered to the Holder.
2.3 Method of
Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof and the Subscription
Agreement. Upon partial conversion of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of
the Holder, be issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or paid.
2.4 Maximum
Conversion. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the Note with respect to which the determination of this provision
is being made on a Conversion Date, which would result in beneficial ownership
by the Holder and its affiliates of more than 4.99% of the issued and
outstanding shares of Common Stock of the Borrower on such Conversion
Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of only 4.99% and aggregate conversion by the Holder
may exceed 4.99%. The Holder shall have the authority and obligation
to determine whether the restriction contained in this Section 2.3 will limit
any conversion hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of
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the
amount of the Note which is convertible shall be the responsibility and
obligation of the Holder. The Holder may increase the permitted
beneficial ownership amount up to 9.99% upon and effective after 61 days prior
written notice to the Company. The Holder may allocate which of the
equity of the Borrower deemed beneficially owned by the Holder shall be included
in the 4.99% amount described above and which shall be allocated to the excess
above 4.99%.
2.5. Mandatory
Conversion. Unless an Event of Default (or an event that with
the passage of time or the giving of notice could become an Event of Default,
has occurred and has not been timely cured, then commencing after the Actual
Effective Date (as defined in Section 11.1(iv) of the Subscription Agreement),
the Borrower will have the option by written notice to the Holder (“Notice of
Mandatory Conversion”) of compelling the Holder to convert part or all of the
outstanding and unpaid principal of this Note into Common Stock at the
Conversion Price then in affect (“Mandatory Conversion”). The Notice
of Mandatory Conversion may only be given, if at all, within five (5) business
days after the Borrower has received the net proceeds from an underwritten
public offering of the Borrower’s equity securities in the gross amount of not
less than $30,000,000 at a per share equivalent price of not less than the
Conversion Price in effect on the final closing of such public offering
(“Mandatory Conversion Conditions”). The date the Notice of Mandatory
Conversion is given is the “Mandatory Conversion Date.” The Notice of Mandatory
Conversion shall specify the aggregate principal amount of the Note which is
subject to Mandatory Conversion. Mandatory Conversion Notices must be
given proportionately to all Holders of Notes who received Notes similar in
terms and tenure as this Note. A Notice of Mandatory Conversion may
not be given unless the Registration Statement (as defined in the Subscription
Agreement dated May 1, 2007) is effective for the unrestricted public resale of
the Registrable Securities (as defined in the Subscription Agreement dated May
1, 2007) for each of the twenty trading days preceding the Mandatory Conversion
Date and through the date the conversion shares are delivered to the
Holder. The amount of Note principal included in a Mandatory
Redemption Notice shall be reduced to an amount that would not cause the Holder
to exceed the limitation described in Section 2.4 of this Note. Each
Mandatory Conversion Date shall be a deemed Conversion Date and the Borrower
will be required to deliver the Common Stock issuable pursuant to a Mandatory
Conversion Notice in the same manner and time period as described in Section 2.1
herein.
ARTICLE
III
EVENT
OF DEFAULT
The
occurrence of any of the following events of default (“Event of Default”) shall,
at the option of the Holder hereof, make all sums of principal and accrued
interest then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable, upon demand, without presentment or grace period,
all of which hereby are expressly waived, except as set forth
below:
3.1 Failure to Pay Principal or
Interest. The Borrower fails to pay any installment of
interest or other sum due under this Note when due and such failure continues
for a period of five (5) business days after the due date. The five
(5) day period described in this Section 3.1 is the same five (5) business day
period described in Section 1.1 hereof.
3.2 Breach of
Covenant. The Borrower breaches any material covenant or other
material term or condition of the Subscription Agreement or this Note in any
material respect
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and such
breach, if subject to cure, continues for a period of ten (10) business days
after written notice to the Borrower from the Holder.
3.3 Breach of Representations
and Warranties. Any material representation or warranty of the
Borrower made herein, in any Transaction Document, or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith or therewith shall be false or misleading in any material respect as of
the date made and as of the Closing Date.
3.4 Receiver or
Trustee. The Borrower shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for a substantial part of its property or business; or such a
receiver or trustee shall otherwise be appointed without the consent of the
Borrower if such receiver or trustee is not dismissed within forty-five (45)
days of appointment.
3.5 Judgments. Any
money judgment, writ or similar final process shall be entered or filed against
the Borrower or any of its property or other assets for more than $50,000, and
shall remain unpaid, unvacated, unbonded or unstayed for a period of forty-five
(45) days.
3.6 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower and if instituted against Borrower are not dismissed within
forty-five (45) days of initiation.
3.7 Delisting. Failure
of the Borrower’s Common Stock to be listed for trading or quotation on a
Principal Market.
3.8 Non-Payment. A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $225,000 for more than thirty (30) days after the
due date, unless the Borrower is contesting the validity of such obligation in
good faith and has segregated cash funds equal to not less than one-half of the
disputed amount.
3.9 Stop
Trade. An SEC or judicial stop trade order or Principal Market
trading suspension with respect to the Borrower’s Common Stock that lasts for
ten (10) or more consecutive trading days.
3.10 Failure to Deliver Common
Stock or Replacement Note. The Borrower’s failure to deliver
Common Stock to the Holder pursuant to and in the form required by this Note and
Sections 7 and 11 of the Subscription Agreement, or, if required, a replacement
Convertible Note more than five (5) business days after the required delivery
date of such Common Stock or replacement Convertible Note.
3.11 Reservation
Default. The failure by the Borrower to have reserved
for issuance upon conversion of the Note the number of shares of Common Stock as
required in the Subscription Agreement.
3.12 Cross
Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement to which the Borrower
and Holder are parties, or the
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occurrence
of a material event of default under any such other agreement which is not cured
after any required notice and/or cure period.
ARTICLE
IV
MISCELLANEOUS
4.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder hereof
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
4.2 Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (a) personally served, (b) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (c)
delivered by a reputable overnight courier service with charges prepaid, or (d)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective upon hand delivery or
delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a
business day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received),
(ii) on the first business day following the date deposited with an overnight
courier service with charges prepaid, or (iii) on the third business day
following the date of mailing pursuant to subpart (b) above, or upon actual
receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be: (i) if to the Borrower to: BigString
Corporation, 0 Xxxxxxx Xxxx, Xxxxx X, Xxx Xxxx, XX 00000, Attn: Xxxxx X. Xxxxx,
President and Chief Executive Officer, telecopier: (000) 000-0000, with a copy
by telecopier only to: Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C., 125 Half Mile
Road, P.O. Box 190, Middletown, NJ 07748, Attn: Xxxx X. Xxxxxxx, Esq.,
telecopier: (000) 000-0000, and (ii) if to the Holder, to the name, address and
telecopy number set forth on the front page of this Note, with a copy by
telecopier only to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, Xxx Xxxx 00000, telecopier number: (000) 000-0000.
4.3 Amendment
Provision. The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or
supplemented.
4.4 Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns. This Note shall not be divided by the Holder except in
increments of not less than $10,000 in principal amount and, in any event, the
Holder shall promptly provide the Borrower written notice of an assignment of
any of the rights under this Note.
4.5 Cost of
Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys’ fees.
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4.6 Governing
Law. This Note shall be governed by and construed in
accordance with the laws of the State of New Jersey. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the civil or state
courts of New Jersey or in the federal courts located in the State of New
Jersey. Both parties and the individual signing this Agreement on
behalf of the Borrower agree to submit to the jurisdiction of such
courts. The prevailing party shall be entitled to recover from the
other party its reasonable attorney’s fees and costs. In the event
that any provision of this Note is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the validity or
unenforceability of any other provision of this Note. Nothing
contained herein shall be deemed or operate to preclude the Holder from bringing
suit or taking other legal action against the Borrower in any other jurisdiction
to collect on the Borrower’s obligations to Holder, to realize on any collateral
or any other security for such obligations, or to enforce a judgment or other
decision in favor of the Holder. This Note shall be deemed an
unconditional obligation of Borrower for the payment of money and, without
limitation to any other remedies of Holder, may be enforced against Borrower by
summary proceeding pursuant to New York Civil Procedure Law and Rules Section
3213 or any similar rule or statute in the jurisdiction where enforcement is
sought. For purposes of such rule or statute, any other document or
agreement to which Holder and Borrower are parties or which Borrower delivered
to Holder, which may be convenient or necessary to determine Holder’s rights
hereunder or Xxxxxxxx’s obligations to Holder are deemed a part of this Note,
whether or not such other document or agreement was delivered together herewith
or was executed apart from this Note.
4.7 Maximum
Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum rate permitted by applicable law. In the event
that the rate of interest required to be paid or other charges hereunder exceed
the maximum rate permitted by applicable law, any payments in excess of such
maximum rate shall be credited against amounts owed by the Borrower to the
Holder and thus refunded to the Borrower.
4.8 Shareholder
Status. The Holder shall not have rights as a shareholder of
the Borrower with respect to unconverted portions of this
Note. However, the Holder will have all the rights of a shareholder
of the Borrower with respect to the shares of Common Stock to be received by
Holder after delivery by the Holder of a Conversion Notice to the
Borrower.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Xxxxxxxx
has caused this Note to be signed in its name by an authorized officer as of the
____ day of June, 2009.
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BIGSTRING
CORPORATION
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By:
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Name:
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Xxxxx
X. Xxxxx
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Title:
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President
and Chief Executive Officer
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WITNESS:
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