Exhibit 4.9
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 ADVANCED OPTICS ELECTRONICS,
INC., THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, ADVANCED OPTICS ELECTRONICS, INC., a Nevada corporation
(hereinafter called the "Borrower"), hereby promises to pay to THE KESHET FUND
L.P., a New York limited partnership, 135 West 50th Street, Suite 1700, New
York, NY 10020, Fax: 212-541-4434 (the "Holder") on order, without demand, the
sum of Two Hundred Thousand Dollars ($200,000), with simple interest accruing at
the annual rate of 8%, on August 30, 2003 (the "Maturity Date").
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. The Borrower shall have a three (3) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of eighteen percent (18%) per annum shall apply to the
amounts owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth in Article
II shall remain in full force and effect immediately from the date hereof and
until the Note is paid in full.
1.3 Interest Rate. Subject to the Holder's right to convert, interest
payable on this Note shall accrue at the annual rate of eight percent (8%) and
be payable in arrears commencing September 30, 2001 and quarterly thereafter,
and on the Maturity Date, accelerated or otherwise, when the principal and
remaining accrued but unpaid interest shall be due and payable, or sooner as
described below.
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ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal amount and
interest due under this Note into Shares of the Borrower's Common Stock as set
forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after 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, and at the
Holder's election, the interest accrued on the Note, (the date of giving of
such notice of conversion being a "Conversion Date") into fully paid and
nonassessable shares of common stock of Borrower as such stock exists on
the date of issuance of this Note, or any shares of capital stock of
Borrower into which such stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion price as defined in Section 2.1(b)
hereof (the "Conversion Price"), determined as provided herein. Upon
delivery to the Company of a Notice of Conversion as described in Section 8
of the Securities Purchase Agreement entered into between the Company and
certain persons who are signatories thereto, including Holder, relating to
this Note (the "Purchase Agreement") of the Holder's written request for
conversion, Borrower shall issue and deliver to the Holder within three
business days from the Conversion Date that number of shares of Common
Stock for the portion of the Note converted in accordance with the
foregoing. At the election of the Holder, the Company will deliver accrued
but unpaid interest on the Note through the Conversion Date directly to the
Holder on or before the Delivery Date (as defined in the Purchase
Agreement). 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 and interest, if any, by the
Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be the lower of (i) seventy five percent
(75%) of the average of the three lowest closing bid prices for the Common
Stock on the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ
National Market System, American Stock Exchange, or New York Stock Exchange
(whichever of the foregoing is at the time the principal trading exchange
or market for the Common Stock, the "Principal Market"), or if not then
trading on a Principal Market, such other principal market or exchange
where the Common Stock is listed or traded, for the thirty (30) trading
days prior to but not including the Closing Date (as defined in the
Purchase Agreement) in connection with which this Note is issued ("Maximum
Base Price"); or (ii) eighty percent (80%) of the average of the three
lowest closing bid prices for the Common Stock on the Principal Market, or
on any securities exchange or other securities market on which the Common
Stock is then being listed or traded, for the ninety (90) trading days
prior to but not including the Conversion Date.
(c) The Maximum Base Price described in Section 2.1(b)(i) above and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to
adjustment from time to time upon the happening of certain events while
this conversion right remains outstanding, as follows:
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A. Merger, 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 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 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, this
Note, as to the unpaid principal portion 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
Common Stock 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. Subject to the provisions of this Section, if
the Borrower at any time shall issue any shares of Common Stock prior
to the conversion of the entire principal amount of the Note
(otherwise than as: (i) provided in Sections 2.1(c)A, 2.1(c)B or
2.1(c)C or this subparagraph D; or (ii) pursuant to options, warrants,
or other obligations to issue shares, outstanding on the date hereof
as set forth in the Schedules to the Purchase Agreement (which
agreement is incorporated herein by this reference); ((i) and (ii)
above, are hereinafter referred to as the "Existing Option
Obligations") for a consideration less than the Conversion Price that
would be in effect at the time of such issue, then, and thereafter
successively upon each such issue, the Conversion Price shall be
reduced as follows: (i) the number of shares of Common Stock
outstanding immediately prior to such issue shall be multiplied by the
Conversion Price in effect at the time of such issue and the product
shall be added to the aggregate consideration, if any, received by the
Borrower upon such issue of additional shares of Common Stock; and
(ii) the sum so obtained shall be divided by the number of shares of
Common Stock outstanding immediately after such issue. The resulting
quotient shall be the adjusted conversion price. Except for the
Existing Option Obligations and options that may be issued under any
employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower, for purposes of this adjustment, the issuance
of any security of the Borrower 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 shares of Common Stock upon
exercise of such conversion or purchase rights.
(d) During the period the conversion right exists, Borrower will reserve
from its authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of Common Stock upon the full conversion of this Note.
Borrower represents that upon issuance, such shares will be duly and validly
issued,
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fully paid and non-assessable. 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 Common Stock upon the
conversion of this Note.
2.2 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 Purchase 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.
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 interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, all without demand, presentment or
notice, 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 principal or interest hereon or on any other promissory note
issued pursuant to the Purchase Agreement, when due and such failure continues
for a period of five (5) days after the due date.
3.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of seven (7) 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 the Purchase Agreement, or in any
agreement, statement or certificate given in writing pursuant hereto or in
connection therewith shall be false or misleading.
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.
3.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against Borrower or any of its property or other assets for
more than $50,000, and shall remain 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
for the relief of debtors shall be instituted by or against the Borrower.
3.7 Delisting. Delisting of the Common Stock from the Principal Market or
such other principal exchange on which the Common Stock is listed for trading;
Borrower's failure to comply with the
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conditions for listing; or notification that the Borrower is not in compliance
with the conditions for such continued listing.
3.8 Concession. A concession by the Borrower, after applicable notice and
cure periods, under any one or more obligations in an aggregate monetary amount
in excess of $50,000.
3.9 Stop Trade. An SEC stop trade order or Principal Market trading
suspension.
3.10 Failure to Deliver Common Stock or Replacement Note. Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 8 of the Purchase Agreement, or if required a
replacement Note.
3.11 Registration Default. The occurrence of a Non-Registration Event as
described in Section 9.4 of the Purchase Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
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. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address as set forth on the signature page to the Purchase
Agreement executed in connection herewith and to a Holder at the address set
forth on the signature page to the Purchase Agreement for such Holder, with a
copy, in the case of a Holder to Daniel M. Laifer, Esq. 135 West 50th Street,
Suite 1700, New York, New York 10020, facsimile number (212) 541-4434, or at
such other address as the Borrower or a Holder may designate by ten days advance
written notice to the other parties hereto. A Notice of Conversion shall be
deemed given when made to the Company pursuant to the Purchase Agreement.
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, and may be assigned by the Holder.
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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.
4.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note 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.
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 permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
4.8 Prepayment. This Note may not be paid (in whole or in part) prior to
the Maturity Date without the consent of the Holder.
4.9 Security Interest. The holder of this Note has been granted a security
interest in common stock of the Company more fully described in a Security
Agreement.
4.10 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by its Chief Executive Officer on this 30th day of August, 2001.
ADVANCED OPTICS ELECTRONICS, INC.
By:________________________________
WITNESS:
____________________________
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NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by ADVANCED OPTICS
ELECTRONICS, INC. on August 30, 2001 into Shares of Common Stock of ADVANCED
OPTICS ELECTRONICS, INC. (the "Company") according to the conditions set forth
in such Note, as of the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
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