Exhibit 10.3a Convertible note dated January 4, 2003, by and between
ShutterPort, Inc. and Xxxxxxxxx Productions, Inc. (Exhibit B
to 10.3)
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER ANY OTHER APPLICABLE SECURITIES LAWS. AS A RESULT, NO SALE OR
TRANSFER OF THIS NOTE OR SUCH SHARES OF COMMON STOCK MAY BE MADE EXCEPT IN
COMPLIANCE WITH OR PURSUANT TO AN EXEMPTION FROM SUCH LAWS.
SHUTTERPORT, INC.
5.926% Convertible Note
$675,000
SHUTTERPORT, INC. a Florida corporation (the "Company"), having its
principal place of business at 0000 X. Xxxxxxx Xxxxxxx Xxxxx 000, Xxxx Xxxxx,
Xxxxxxx 00000, for value received, hereby promises to pay to Xxxxx Xxxxxxxxx or
registered assigns ("Holder"), on January 5, 2012 (the "Maturity Date"), the
principal sum (the "Principal Amount") of Six Hundred Seventy Five Thousand
Dollars ($675,000).
1. INTEREST. The Company shall pay interest on the outstanding
Principal Amount from the date hereof, at the rate of five and nine hundred
twenty six thousands percent (5.926%) per annum. Accrued interest shall be
payable annually in arrears, provided that the initial interest payment shall be
made simultaneously with the issuance of this Note by the issuance and delivery
of 40,000 shares of the Company's Common Stock ("Common Stock"). The Company
shall also pay interest on any overdue Principal Amount at the highest rate
permitted under the laws of the State of Florida from the date of default to the
date of payment of the overdue amount. All computations on interest shall be
made on the basis of a year of 360 days on the actual number of days any such
Principal Amount is outstanding. The Company shall have the option of paying the
interest in cash or shares ("Shares") of Common Stock. If payment is made in
Shares, then the number of shares shall be computed based on 60% of the average
bid price for the 10 trading days ending on the interest payment date.
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2. PREPAYMENT.
NO PREPAYMENT PENALTY. The Principal Amount and all accrued interest on
the Note may be paid at any time, without penalty, provided that there shall not
be any prorations or adjustment for payments in the first year with respect to
the Shares issued as payment for interest.
REQUIRED PRINCIPAL PAYMENTS. The Company shall be required from time to
time to redeem Principal Amount of the Note equal to 33 1/3% of all gross
proceeds collected by the Company [with respect to the Howdy Xxxxx library],
less related third party costs for duplication and distribution. With Holder's
prior written consent, which may be withheld in Holder's sole discretion, the
gross proceeds may be further adjusted for other related expenses. Said payment
shall be received by the Holder within five days of receipt of cleared funds by
the Company. The Company shall provide Holder with quarterly statements of
activity of collections within 10 business days of the end of each quarter
commencing with the quarter ending March 31, 2003.
CHANGE OF CONTROL. The Principal Amount and all accrued interest on the
Note shall be immediately due and payable upon the acquisition by any person,
entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, of more than 50% of either the then outstanding
shares of the Company's Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors excluding, for this purpose, any acquisitions by (a) the
Company, (b) any person, entity or "group" that as of the date of this Note owns
at least 51% of the Company's Common Stock.
OFFSET. The Purchaser may offset against the Note any direct
out-of-pocket expenses paid by Purchaser, including legal fees, used to defend
any third party claims against the Purchased Assets relating to the ownership of
such assets, up to $75,000. Purchaser will provide Seller documentation of such
expenses.
3. TRANSFER AND EXCHANGE.
NO VIEW TOWARD DISTRIBUTION. The Holder represents and warrants that he
has acquired this Note for its own account for investment purposes and not with
a view toward the distribution of this Note or of the shares of Common Stock
issuable upon conversion of this Note.
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TRANSFER OF RESTRICTED SECURITIES. This Note and the shares of Common
Stock issuable upon the conversion hereof (collectively, "Restricted
Securities") are transferable only pursuant to (i) a public offering registered
under the Securities Act of 1933, as amended (the "Securities Act"), (ii) Rule
144 promulgated under the Securities Act (or any similar rule then in force) if
such rule is available, or (iii) any other legally available means of transfer.
4. CONVERSION.
OPTIONAL CONVERSION. The outstanding principal amount of this Note plus
all accrued but unpaid interest due thereon shall be convertible at the option
of the Holder at a conversion price (the "Conversion Price") equal to $1.50 per
share, subject to adjustment as provided herein. The Holder must convert at
least $75,000 Principal Amount at any time, provided that if less than $75,000
is then outstanding, then all of such remaining amount shall be converted if any
is converted.
SURRENDER OF NOTE. The Holder shall surrender the Note to the Company
accompanied by a written conversion notice to the Company which sets forth the
amount of the Note to be converted and the name, with address, in which the
certificate for the Shares issuable on such conversion shall be issued.
DELIVERY. Promptly after the receipt of such notice and the surrender
of this Note as aforesaid, the Company covenants to effect such conversion, and
the Company shall deliver to the Holder a certificate for the number of full
shares of Common Stock issuable upon the conversion of this Note (or specified
portion thereof). In the event an amount less than the total outstanding amount
shall be converted, the Company shall issue a new Note for the remaining amount
of the Note within ten (10) days after the date of conversion.
COMMON STOCK IN RESERVE. The Company shall at all times reserve and
keep available, free from preemptive rights, out of the Company's authorized but
unissued Common Stock, for the purpose of effecting the conversion of this Note,
the full number of Shares.
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5. CONVERSION PRICE ADJUSTMENT.
The Conversion Price shall be subject to adjustment from time to time
as set forth in this Section 5.
STOCK DIVIDENDS. In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in shares of
Common Stock, the Conversion Price in effect at the opening of business on the
day following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying the
Conversion Price in effect immediately prior to such adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
date following the date fixed for such determination.
SUBDIVISIONS AND COMBINATIONS. In case the outstanding shares of Common
Stock shall be subdivided into a greater number of shares, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in the case where the outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased.
CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. In case at any time or from
time to time the Company shall fix a record date for the purpose of determining
the holders of its Common Stock entitled to receive any dividend or other
similar distribution of cash, or any evidences of its indebtedness, any shares
of its stock or any other securities or property of any nature whatsoever, or
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any warrants or other rights to subscribe for or purchase any evidence of its
indebtedness, any shares of its stock or any other securities or property of any
nature whatsoever, then the Conversion Price in effect at the opening of
business on the day following the date fixed for such determination shall be
adjusted by multiplying the Conversion Price in effect immediately prior to such
adjustment by a fraction (i) the numerator of which shall be the fair value per
share of Common Stock at the date of such determination minus the portion
applicable to one share of Common Stock of any cash so distributable and the
fair value (as determined in good faith by the Board of Directors of the
Company) of any and all evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase rights so
distributable, and (ii) the denominator of which shall be the fair value per
share of Common Stock at the date of such determination. A reclassification of
the Common Stock into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 5 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, shall be deemed a subdivision or combination, as the case may
be, of the outstanding shares of Common Stock within the meaning of Section 5.
OTHER PROVISIONS APPLICABLE TO ADJUSTMENT UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
Conversion Price hereinbefore provided for in this Section:
The adjustments required by this Section 5 shall be made whenever and
as often as any specified event requiring an adjustment shall occur, except that
no adjustment of the Conversion Price that would otherwise be required shall be
made except in the case of a subdivision or combination of shares of the Common
Stock, as provided for in Section 5 unless and until such adjustment either by
itself or with other adjustments not previously made adds to or subtracts from
the Conversion Price immediately prior to the making of such adjustment at least
$.02. Any adjustment representing a change of less than such minimum amount
(except as aforesaid) shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 5 and not
previously made, would result in a minimum adjustment. For the purpose
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of any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
In computing adjustments under this Section, fractional interests in
Common Stock shall be taken into account to the nearest one-hundredth of a
share.
CHANGES IN COMMON STOCK, CONSOLIDATION, MERGER OR SALE. In case at any
time and from time to time the Company shall be a party to any transaction
including, without limitation, a merger or consolidation with or into another
entity, a sale of all or substantially all of the Company's assets to another
entity, a liquidation, or a recapitalization or reclassification of the Common
Stock (each such transaction being hereinafter referred to as a "Transaction"),
and such Transaction if effected in such a way that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) cash,
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition to such Transaction, lawful and adequate provision will be
made whereby the Holder of this Note will thereafter have the right to acquire
and receive in lieu of the shares of Common Stock immediately theretofore
acquirable and receivable upon the exchange of such holder's Note, such cash,
shares of stock, securities or assets as may be issuable or payable with respect
to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exchange of such Holder's Note had
such Transaction not taken place (subject to adjustments from and after the
consummation of such Transaction as nearly equivalent as possible to the
adjustments provided for in this Section 5). The Company will not effect any
Transaction unless, prior to the consummation thereof, each person that may be
required to deliver any cash, securities or other property upon the exchange of
Notes as provided herein shall assume, by written instrument delivered to each
Holder of Notes, the obligation to deliver to such Holder such cash, securities
or other property as in accordance with the foregoing provisions such Holder may
be entitled to receive. The foregoing provisions of this Section 5 shall
similarly apply to successive mergers, consolidations, sales of assets,
liquidations, recapitalization and reclassifications.
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NOTICE OF CERTAIN ACTIONS. If, while this Note remains outstanding, the
Company shall propose to take any action that would require an adjustment
pursuant to this Section 5, then the Company shall cause to be mailed by
certified mail to the Holder, at least ten (10) days prior to the applicable
record date, a notice describing such action.
6. EVENTS OF DEFAULT; REMEDIES.
EVENTS OF DEFAULT; ACCELERATION. If any of the following conditions or
events ("Events of Default") shall occur (whether voluntary or involuntary or
arising by operation of law or otherwise):
the Company shall default in the payment of any principal or interest
under this Note, or any other Note given in connection with the transaction
contemplated hereby;
the Company (i) files, or consents by answer (or failure to contest) or
otherwise to the filing against it of, a petition for relief or reorganization
or arrangement of any other petition in bankruptcy, for liquidation or
dissolution or to take advantage of any present or future bankruptcy or
insolvency law of any jurisdiction, (ii) make an assignment for the benefit of
its creditors, (iii) seek or consent to the appointment of a custodian,
receiver, trustee, liquidator or other officer with similar powers of itself or
of any substantial part of its property, (iv) be adjudicated a bankrupt or an
insolvent or be liquidated or dissolved, or (v) take corporate action for the
purpose of any of the foregoing; then, the unpaid principal amount of this Note,
together with the interest accrued thereon as well as any unpaid principal and
accrued interest on any other Note given in connection herewith and shall
automatically become and be due and payable, without presentment, demand,
protest, notice or other requirements of any kind, all of which are hereby
expressly waived by the Company.
REMEDIES ON DEFAULT. If any Event of Default shall have occurred and be
continuing for a period of ten (10) days, the Holder of this Note may proceed to
protect and enforce the rights available to such Holder either by an action at
law, suit in equity or both, whether for the specific performance of any
agreement contained in this Note, or for an injunction against a violation of
any
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of the terms hereof, or in aid of the exercise of any power granted hereby or by
law or otherwise. The Company will pay the Holder all such further amounts to
cover the cost and expenses of collection including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
REMEDIES NOT WAIVED. No course of dealing and no delay on the part of
Holder in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice Holder's rights, powers or remedies.
REMEDIES NOT CUMULATIVE. No right, power or remedy conferred upon
Holder shall be exclusive of any other right, power or remedy referred to herein
or now or hereafter available at law, in equity, by statute or otherwise.
7. RANKING. This Note shall rank senior to all other indebtedness of
the Company, whether now outstanding or issued in the future.
8. SECURITY. This repayment of this Note shall be collateralized by the
Company's rights in the Howdy Xxxxx library. The Company agrees to execute all
documents requested by Holder with respect to such security interest within two
business days of written request by Holder.
9. MODIFICATION AND WAIVER.
The rights and obligations of the Company may not be modified or
waived, except in writing signed by the Company and the Holder.
10. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Florida without reference to its principles
governing conflicts of law. In the event of any proceeding to recover amounts
owing, the prevailing party shall be paid all its costs and expenses including
reasonable attorneys' fees, up to $10,000.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under
its corporate seal.
Date: January 4, 2003
SHUTTERPORT, INC.
By: /S/ XXXXXX XXXXX
Xxxxxx Xxxxx, President
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