Exhibit 10.28
SISKON GOLD CORPORATION
(A California Corporation)
________________________________________
PROJECT FINANCE CONVERTIBLE NOTE
$500,000 AGGREGATE PRINCIPAL AMOUNT
DUE NOVEMBER 15, 1998
________________________________________
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF AS PROVIDED HEREIN HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR UNDER THE LAWS OF ANY STATE OR OTHER
JURISDICTION. TRANSFER OF THIS NOTE AND SUCH SECURITIES IS RESTRICTED
PURSUANT TO SUCH LAWS.
Sacramento, California
$500,000 May 17, 1996
1. NOTE.
1.1. SISKON GOLD CORPORATION, a California corporation having its
principal office at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx,
Xxxxxxxxxx (the "Company"), hereby promises to pay to the order of XXXX
XXXXXX, having an address at 00 Xxxxxxx Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx
00000 (the "Holder") the principal amount of Five Hundred Thousand Dollars
($500,000) on November 15, 1998 (the "Due Date") together with interest
from May 17, 1996, at ten percent (10%) per annum on the outstanding
principal and interest, if any, until paid or converted. Payments of
interest only shall be paid annually on the first day of November of each
year. Payments shall be made to the Holder as follows:
(a) SHARES: The first two payments of interest (i.e., the payments
due on November 1, 1996, and November 1, 1997) may be paid to the
Holder in shares of the Company's fully paid and nonassessable
Class A Common Stock (the "Shares") (or, in the event of a
merger, recapitalization or like transaction, the equivalent
capital stock for which such number of shares shall be exchanged
or exchangeable or converted or convertible), which Shares shall
be subject to registration before subsequent transfer or sale by
the Holder. The exact number of Shares to be delivered to the
Holder in payment of the accrued interest shall be determined by
dividing the accrued interest by ONE DOLLAR AND 75/100THS ($1.75)
per Share (regardless of the then market price of such Shares).
If the Company at any time, or from time to time, shall cause an
"Event" (as defined in Section 3.3) to affect the number of
Shares outstanding or required to be reserved for issuance to pay
interest as required under this Note, then the number of Shares
to be delivered to Holder shall be calculated according to the
following formula:
[ (I/$1.75) = S1 ] x X/Y = S2
defining the variables in such formula as:
I = the amount of accrued Interest then due;
S1 = the number of Shares that would have been issued
at $1.75 per Share but for the Event;
S2 = the number of Shares to be issued;
X = the number of Shares outstanding on the date the
Event is effective; and
Y = the number of Shares outstanding immediately prior
to the Event.
(FOR EXAMPLE, IF I = $300,000 AND THE "EVENT" IS A STOCK SPLIT
DOUBLING THE NUMBER OF OUTSTANDING SHARES, THEN:
[ (I/$1.75) = S1 ] X X/Y = S2
WOULD BE SOLVED:
[ ($300,000/$1.75) = 171,428.57 ] X 2/1 = 342,857
AND 342,857 SHARES WOULD BE ISSUED TO THE HOLDER.)
(b) CASH: the third payment of interest (and all subsequent payments
of interest, if any), shall be paid to the Holder in lawful money
of the United States at Holder's principal address identified
above, or at such other place as the Holder may specify in
writing. In addition, the first and second payments of interest
due on November 1, 1996 and November 1, 1997, respectively, may
also be paid to the Holder, at the election of the Company, in
lawful money of the United States.
1.2. In the event the Company does not make when due any payment
of principal or interest required to be made hereunder, the Company will
pay, on demand, interest on the amount of any overdue payment of principal
or interest for the period following the Due Date, at a rate of fourteen
percent (14%) per annum or the maximum interest rate permitted by
California law, whichever is lower.
2. DEFAULT.
In the event of an occurrence of any event of default specified below
("Event of Default"), the principal and all accrued interest on this Note
shall, at the election of Holder, become immediately due and payable
without notice, except as specified below. The occurrence of any of the
following events shall constitute an Event of Default under this Note:
2.1. If the Company fails to make, on or before any due date in
the manner required herein any payment of principal or interest due under
the terms of this Note, and such failure has not been cured within ten (10)
days following the due date thereof.
2.2 If the Company shall default in the observance or
performance of any covenant contained in or provision of the Project
Finance Loan Agreement between the Company and the Holder of even date
herewith or the Deed of Trust or Assignment of Rents and Leases of even
date herewith between the Company and the Holder relating to the property
known as the San Xxxx Property located in Nevada County, California, or the
Deed of Trust or Assignment of Rents and Leases of even date herewith
between the Company and the Holder relating to property known as the
Big Horn Property located in Los Angeles County, California, as the same
may be amended from time to time, and which default has not been cured
within twenty (20) days of the receipt by the Company of written notice
thereof from or on behalf of the Holder.
2.3 If a default shall occur in the payment of any principal,
interest or premium with respect to any indebtedness for borrowed money or
any obligation which is the substantive equivalent thereof (including,
without limitation, obligations under conditional sales contracts, finance
leases and the like) of the Company or under any agreement or instrument
under or pursuant to which any such indebtedness or obligation may have
been issued, created, assumed, guaranteed or secured by the Company, or any
agreement or instrument executed in connection with any of the foregoing,
including without limitation any security agreement or pledge agreement or
other agreement of any nature or description, and such default shall
continue for more than the period of grace, if any, therein specified, or
if any such indebtedness shall be declared due and payable prior to the
stated maturity thereof and which has not been cured within twenty (20)
days of the receipt by the Company of written notice thereof from or on
behalf of the Holder.
2.4 If the Company shall be unable to pay its debts generally as
they become due; file a petition to take advantage of any insolvency act;
make an assignment for the benefit of its creditors; commence a proceeding
for the appointment of a receiver, trustee, liquidator or conservator of
itself of a whole or any substantial part of its property; file a petition
or answer seeking reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state; or
2.5 If a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of the Company or of the whole or any substantial part of its
properties, or approve a petition filed against the Company seeking
reorganization or arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States
of America or any state; or if, under the provisions of any other law for
the relief or aid of debtors, a court of competent jurisdiction shall
assume custody or control of the Company or of the whole or any substantial
part of its properties; or if there is commenced against the Company any
proceeding for any of the foregoing relief and such proceeding or petition
remains undismissed for a period of thirty (30) days of the receipt by the
Company of a written notice thereof; or if the Company by any act indicates
its consent to or approval of any such proceeding or petition; or
2.6 If (i) any judgment, remaining unpaid, unstayed or
undismissed for a period of thirty (30) days is rendered against the
Company which by itself or together with all other such judgments rendered
against the Company remaining unpaid, unstayed or undismissed for a period
of thirty (30) days, is in excess of $200,000, or (ii) there is any
attachment or execution against the Company's properties remaining unstayed
or undismissed for a period of thirty (30) days which by itself or together
with all other attachments and executions against the Company's properties
remaining unstayed or undismissed for a period of thirty (30) days is for
an amount in excess of $200,000.
3. CONVERSION.
The Holder of this Note shall have conversion rights as follows:
3.1. RIGHT TO CONVERT. The principal amount of this Note, together
with accrued but unpaid interest, shall be convertible, at the option of
the Holder on one or more occasions at any time immediately following the
date of this Note through, and including, the Due Date into shares (subject
to adjustment pursuant to Section 3.4) of the Company's fully paid and
nonassessable Class A Common Stock ("Shares") (or, in the event of a
merger, recapitalization or like transaction, the equivalent capital stock
for which such number of Shares shall be exchanged or exchangeable or
converted or convertible). The exact number of Shares into which such
principal and accrued interest is convertible shall be determined by
dividing the amount of principal and accrued interest by the then effective
Conversion Price (as defined in Section 3.2). Upon conversion into Shares,
the amount of principal and accrued interest which is converted into Shares
shall be discharged.
3.2. CONVERSION PRICE. Subject to adjustment pursuant to Section 3.3
hereof, the Conversion Price at which Shares shall be issuable upon
conversion under Section 3.1 of this Note shall be
$1.75 per Share. However, in the event that the Company issues any Shares
or other securities convertible into Shares at a price of less than $1.75
per Share at any time during which this Note is outstanding, (the
"Underpriced Shares"), then the Conversion Price under this Note shall be
adjusted downward to match the price at which such Underpriced Shares were
sold.
3.3. ADJUSTMENT TO THE CONVERSION PRICE. If the Company at any time,
or from time to time, shall by reason of capital reorganization,
combination, stock split, reverse stock split, stock dividend or like event
(the "Event") affect the number of Shares outstanding or required to be
reserved for issuance upon conversion of this Note, then the Conversion
Price shall be adjusted to be the product of the Conversion Price and the
fraction (x/y), the numerator (x) of which shall be the number of Shares
outstanding or required to be reserved for issuance upon conversion of this
Note immediately prior to the Event, and the denominator (y) of which shall
be the number of Shares outstanding or required to be reserved for issuance
upon conversion of this Note on the date such Event is effected.
3.4. ADJUSTMENT OF NUMBER OF SHARES. If the Company at any time, or
from time to time, effects an Event (as defined in Section 3.3) which
affects the number of Shares outstanding or required to be reserved for
issuance upon conversion of this Note, then the number of Shares into which
this Note is convertible shall be adjusted to be the product of the number
of Shares into which this Note is convertible at the date of this Note and
the fraction (x/y), the numerator (x) of which shall be the number of
Shares outstanding or required to be reserved for issuance upon conversion
of this Note on the date such Event is effected, and the denominator (y) of
which shall be the number of Shares outstanding or required to be reserved
for issuance upon conversion of this Note immediately prior to the Event.
3.5. MECHANICS OF CONVERSION. Before the Holder shall be entitled to
convert this Note into Shares, it shall surrender this Note duly endorsed,
and shall deliver to the Company a Notice of Conversion (in the form as
attached hereto as EXHIBIT A and incorporated herein by this reference) at
the office of the Company, and shall state therein the amount or amounts in
which the certificate or certificates for Shares are to be issued. The
Company shall, as soon as practicable thereafter, but in no event more than
ten (10) days, issue and deliver to the Holder at the address designated by
the Holder, a certificate or certificates for the number of Shares to which
the Holder shall be entitled as aforesaid, a statement indicating the
manner in which any adjustments pursuant to Sections 3.3 and 3.4 have been
made, and a new note for the remaining unpaid principal with all other
terms and conditions in the same form as the Note surrendered hereunder.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the Note and the Holder
shall be treated for all purposes as the record holder or holders of such
Shares as of such date. All Shares issuable upon conversion of this Note
shall be fully paid and nonassessable.
3.6. FRACTIONAL SHARES. In no event shall the Company issue any
certificate evidencing any fraction of a Share, but in lieu thereof shall
pay cash for such fraction at the then effective Conversion Price.
3.7. RESERVATION OF SHARES. The Company shall at all times reserve
and keep available out of its authorized but unissued Shares, solely for
the purpose of effecting the conversion of this Note, the full number of
whole Shares then deliverable upon the conversion of the entire principal
amount of this Note at the time outstanding. The Company shall take at all
times such corporate action as shall be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Shares upon the
conversion of this Note in accordance with the provisions hereof.
4. SECURITY.
This Note is made in consideration of an advance of funds by Holder to
the Company subject to the terms and conditions of the Project Finance Loan
Agreement effective as of May 17, 1996 between the Company and the Holder
(the "Project Finance Loan Agreement). The Company's obligations hereunder
are secured by the grant to the Holder of a security interest in certain
assets of the Company in accordance with the terms and conditions set forth
in the Deed of Trust and Assignment of Rents and Leases of effective as of
May 17, 1996 entered into between the Company and the Holder relating to
the property known as the San Xxxx Property located in Nevada County,
California as more fully described therein, and as may be amended from time
to time, a form of which is attached as EXHIBIT B to the Project Finance
Loan Agreement, and another Deed of Trust and Assignment of Rents and
Leases of effective as of May 17, 1996 entered into between the Company and
the Holder relating to the property known as the Big Horn Property located
in Los Angeles County, California as more fully described therein, and
as may be amended from time, a form of which is attached as EXHIBIT C
to the Project Finance Loan Agreement.
5. PREPAYMENT/NOTICE OF CERTAIN EVENTS.
The Company shall have the right to prepay this Note at any time
before maturity by paying the principal amount of this Note together with
all accrued but unpaid interest; provided, however, that the Company shall
give the Holder not less than ninety (90) days prior written notice of its
intent to prepay this Note. The Holder may convert this Note into Shares
at any time following delivery of such notice until receipt by the Holder
of payment in full of the amounts due under this Note. The Company shall
provide the Holder with not less than thirty (30) days prior written notice
(and in no event less than ten (10) days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto)
of any merger, consolidation, buy-out, dividend, stock dividend or other
event or transaction affecting the Shares which may be acquired upon the
conversion of this Note.
6. SECURITIES LAW COMPLIANCE
6.1. RESTRICTIONS ON TRANSFER. The Holder understands that the
right of conversion of this Note is subject to full compliance with the
provisions of all applicable securities laws and the availability
thereunder upon any conversion of any exemption from registration
thereunder for such conversion or registration thereunder as provided in
the Project Finance Loan Agreement, and that the certificate or
certificates evidencing such Shares shall bear a legend to the following
effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE. THEY HAVE BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING THESE SECURITIES UNDER THE SAID ACT OR LAWS,
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT REGISTRATION IS NOT REQUIRED THEREUNDER."
6.2. REGISTRATION RIGHTS. Holder shall have the right to have
the shares of the Company's Class A Common Stock issuable to Holder on
conversion of this Note and the shares issued in payment of interest
registered under and in accordance with the provisions of the Securities
Act of 1933, as amended, as provided for in Section 6 of the Project
Finance Loan Agreement.
7. NOTICES.
Any notice herein required or permitted to be given shall be in
writing and may be personally served, sent by United States Mail,
registered or certified, return receipt requested, postage prepaid, or sent
by telecopy facsimile with a copy sent by recognized national overnight
delivery service, and shall be deemed effectively given upon personal
delivery or on the earlier of actual receipt or five (5) days after deposit
with the United States Postal Service, postage prepaid. For the purposes
hereof, the address of the Holder and the address of the Company shall be
as reflected in the Project Finance Loan Agreement. Both the Holder and
the Company may change the address for service by written notice to the
other as herein provided.
8. NO WAIVER; RIGHTS AND REMEDIES CUMULATIVE.
No failure on the part of the Holder to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise by the Holder of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies herein provided are cumulative and not
exclusive of any remedies or rights provided by law or by any other
agreement between the Company and the Holder.
9. COSTS AND EXPENSES.
The Company shall reimburse the Holder for all costs and expenses
incurred by the Holder in connection with the preparation, execution and
closing of this Note and the Deeds of Trust and Assignments of Rents and
Leases, and shall pay the reasonable fees and disbursements of counsel to
the Holder in connection with the enforcement of the Holder's rights
hereunder.
10. AMENDMENTS.
No amendment, modification or waiver of any provision of this Note nor
consent to any departure by the Company therefrom shall be effective unless
the same shall be in writing and signed by the Holder and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
11. SUCCESSORS AND ASSIGNS.
This Note shall be binding upon the Company and its successors and
assigns and the terms hereof shall inure to the benefit of the Holder and
their successors and assigns, including subsequent holders hereof.
12. SEVERABILITY.
The provisions of this Note are severable, and if any provision shall
be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall not in any manner affect
such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
13. WAIVER OF NOTICE.
The Company hereby waives presentment, demand for payment, notice of
protest and all other demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note.
14. GOVERNING LAW.
This Note has been executed in and shall be governed by the laws of
the State of California without regard to the conflicts of law provisions
thereof.
15. NOTEHOLDER IS NOT A SHAREHOLDER.
No Holder of this Note, solely by virtue of the ownership of this
Note, shall be considered a shareholder of the Company for any purpose, nor
shall anything in this Note be construed to confer on any Holder of this
Note any rights of a shareholder of the Company including, without
limitation, any right to vote, give or withhold consent to any corporate
action, receive notice of meetings of shareholders or receive dividends.
16. TRANSFER, EXCHANGE AND REPLACEMENT OF NOTE.
This Note and any payment of principal or interest due hereunder is
transferable, negotiable and assignable at the option of the Holder hereof.
Upon surrender of this Note to the Company, the Company shall execute and
deliver, at its expense, one or more new Notes of such denominations and in
such names, as requested by the Holder of the surrendered Note. Upon
receipt of evidence satisfactory to the Company of the loss, theft,
mutilation, or destruction of any Note, the Company will make and deliver a
new Note, of like tenor, at the request of the Holder of such Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by
its officers, hereunto duly authorized to be effective as of the date first
written above.
SISKON GOLD CORPORATION
By XXXXXXX X. XXXXXXXX
Xxxxxxx X. Xxxxxxxx, President
ATTEST:
XXXXXXX XXXX
Xxxxxxx Xxxx, Secretary
EXHIBIT A
NOTICE OF CONVERSION
The undersigned holder of a Project Finance Convertible Note (the
"Note") due November 15, 1998, in the original principal amount of Five
Hundred Thousand Dollars ($500,000) of Siskon Gold Corporation (the
"Company") hereby exercises the option to convert the Note into ___________
shares of Class A Common Stock of the Company in accordance with the terms
of the Note, and directs that the shares issuable upon the conversion be
issued in the undersigned's name and delivered to the undersigned as soon
as practicable.
The number of shares to be received in the conversion is
________________, and after the conversion the principal amount and accrued
interest remaining outstanding on the Note is $_______________.
Date:__________________ _________________________________
Date:__________________ _________________________________
