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EXHIBIT 10.1
THE SECURITY EVIDENCED BY THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION
OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE, TRANSFER OR ASSIGNMENT IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT,
OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER OR
ASSIGNMENT IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SUCH ACT.
SECURED PROMISSORY NOTE
Up to Three Million Five Hundred Thousand Dollars
($3,500,000) March 15, 2001
FOR VALUE RECEIVED, the undersigned, Euphonix, Inc., a California
corporation ("Borrower"), hereby promises to pay to Dieter Meier ("Meier"),
Walter Bosch ("Bosch") and to any other persons or entities listed on Exhibit A
hereto from time to time (individually an "Investor" and collectively, the
"Investors"), or registered assigns, the principal sum equal to the aggregate
value of all Advances (as defined in Section A.2 hereof) made by the Investors
as set forth on Exhibit A up to Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Maximum Principal Amount"), together with accrued interest,
as provided herein, to be allocated among the Investors pro rata as set forth on
Exhibit A (the "Pro Rata Share").
A. Principal.
1. Commitments. Of the Maximum Principal Amount, Meier agrees to loan to
Borrower up to Three Million Dollars ($3,000,000), or 85.71% of the Maximum
Principal Amount ("Meier's Commitment"). Of the Maximum Principal Amount, Bosch
agrees to loan to Borrower up to Five Hundred Thousand Dollars ($500,000), or
14.29% of the Maximum Principal Amount ("Bosch's Commitment," and together with
Meier's Commitment, collectively "Commitments"). In the event that any persons
or entities (other than Meier or Bosch) make Advances (as defined in Section A.2
hereof) of not less than $100,000 to Borrower, such persons or entities shall be
added to Exhibit A as Investors, and the amount of Meier's Commitment and
Bosch's Commitment shall each be reduced on a pro-rata basis. Each of Meier and
Bosch shall be severally but not jointly liable to make his respective
Commitment hereunder, subject to any reduction in the Commitments pursuant to
this section. Failure by either Meier or Bosch to fund his Commitment shall not
relieve the other from his obligation to fund his Commitment, subject to any
reduction in the Commitments pursuant to this section.
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2. Advances. From the date hereof until 5:00 p.m. Pacific time on
December 31, 2001, Borrower may from time to time request advances from the
Investors (individually an "Advance" and collectively, the "Advances") by giving
written notice to the Investors in accordance with the terms hereof, which
notice shall indicate the amount of the Advance(s) requested; provided, however,
that no Advance shall be in the aggregate less than $100,000. Subject to the
satisfaction or waiver of the conditions set forth in Section A.3 below, and
provided that the requested Advance(s) would not cause an Event of Default (as
defined in Section E below) to occur, the Investor(s) shall make the Advance(s)
to Borrower within three (3) business days of receipt of Borrower's notice for
each Advance. Borrower's notice to the Investors referred to in the preceding
sentence shall be accompanied by a Certificate from the Chief Executive Officer,
President or Chief Operating Officer of Borrower certifying as to Borrower's
compliance with all of the conditions set forth in Section A.3 below (unless any
of such conditions is waived in writing by the Investors). The Investors shall
not be obligated to make any Advance to the extent that such Advance, when
aggregated with all prior Advances, would exceed the Maximum Principal Amount.
The Investor making an Advance shall concurrently sign a Counterpart Signature
Page setting forth, among other things, the date and amount of the Advance. As
soon as reasonably practicable after the making of each Advance, Borrower shall
amend Exhibit A to reflect such Advance.
3. Conditions to Advances. Borrower's right to request, and the
Investors' obligation to make, each Advance shall be subject, in each case, to
the satisfaction of the following conditions, any or all of which may be waived
by a majority in interest of the Investors, in their sole and exclusive
discretion, to the extent permitted by law:
(a) The representations and warranties contained in Section D.2 and
Section D.3 shall be true and correct in all material respects on and as of the
date of such request for an Advance and on the effective date of each Advance as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance.
(b) There shall be no law, order, rule or regulation of any
governmental authority in effect which has the effect of prohibiting, making
unlawful or hindering any of the transactions contemplated by this Secured
Promissory Note (the "Note").
(c) There shall be no outstanding Event of Default and no condition
which, with notice or passage of time or both, would constitute an Event of
Default.
(d) The Board of Directors of Borrower shall have approved this Note
and all transactions evidence by this Note, including without limitation the
conversion feature of this Note.
4. Use of Proceeds. The proceeds of the Advances shall be used for
general corporate purposes, including for working capital. The proceeds of the
Advances shall not be used for payments or distributions to shareholders,
directors, officers or affiliates of Borrower. Notwithstanding the foregoing,
such proceeds may be used for the payment of expenses and salaries of officers
and employees of Borrower and bonuses of officers and employees of Borrower
approved by Borrower's Board of Directors.
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B. Interest. Interest shall accrue with respect to Advances on the
principal sum hereunder at the per annum rate of ten percent (10.00%), net of
any deductions or withholding taxes. Interest payable hereunder shall be
calculated on the basis of a three hundred sixty five (365) day year for actual
days elapsed. Interest shall be due and payable (or converted as set forth in
Section C below) upon payment or conversion of the principal sum of this Note
pursuant to Section C below. Notwithstanding anything herein to the contrary,
during any period for which an Event of Default shall have occurred and be
continuing, interest shall accrue with respect to Advances on the principal sum
hereunder at the per annum rate of fourteen percent (14.00%), net of any
deductions or withholding taxes.
C. Payment or Conversion.
1. Scheduled Payment. Subject to other provisions of this Note, the
outstanding principal sum of this Note, together with the accrued interest
thereon, shall be due and payable to the Investors on March 31, 2002, according
to the Pro Rata Share set forth opposite each Investor's name as set forth on
Exhibit A.
2. Prepayment. Upon obtaining all necessary shareholder, regulatory and
other approvals or consents (to the extent such approvals or consents are
necessary), Borrower shall have the right to prepay, in whole only, the
outstanding principal sum of this Note and/or any accrued interest thereon;
provided, however, that if Borrower wishes to make such prepayment, it shall
give at least fourteen (14) days written notice to the Investors of its
intention to prepay, during which time the Investors may instead elect to
convert the outstanding principal sum of this Note and/or any accrued interest
thereon pursuant to Section C.5 herein.
3. Form of Payment. Unless converted pursuant to the terms set forth
below, the outstanding principal sum and accrued interest thereon are to be paid
in lawful money of the United States of America in federal or other immediately
available funds.
4. Immediate Payment. Notwithstanding anything herein to the contrary,
in the event that all necessary shareholder, regulatory and other approvals or
consents for the convertibility of this Note as set forth below are not obtained
by January 2, 2002 (to the extent such approvals or consents are necessary), (i)
the outstanding principal sum from all Advances as of the date thereof and (ii)
accrued interest thereon, shall be promptly repaid by Borrower in full,
according to the Pro Rata Share set forth opposite each Investor's name as set
forth on Exhibit A, upon demand by the Investors representing two-thirds (2/3)
of the then outstanding principal sum of this Note. Such demand may not be made
(x) if shareholder approval for the convertibility of this Note is not obtained
as a result of the Investors failing to vote or consent for such convertibility,
or (y) if shareholder approval for the convertibility of this Note would not be
required so long as the Borrower obtains shareholder approval with respect to
such other security issuances by the Borrower, but shareholder approval with
respect to such other issuances is not obtained as a result of the Investors
failing to vote or consent with respect to such other issuances.
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5. Conversion.
(a) Upon obtaining all necessary shareholder, regulatory and other
approvals or consents (to the extent such approvals or consents are necessary),
and subject to Section C.5(c) hereof, the outstanding principal from all of the
Advances, together with accrued interest thereon, shall be convertible at the
option of the Investors into shares of common stock of the Borrower (the "Common
Stock"); provided, however, that the Investors must provide at least ten (10)
days prior written notice to Borrower prior to such conversion. The number of
shares of Common Stock to be issued upon such conversion to each Investor shall
be equal to the quotient obtained by dividing (i) the aggregate amount of the
Advances made by such Investor plus accrued interest thereon by (ii) $0.75 per
share.
(b) No fractional share of Common Stock will be issued upon such
conversion of this Note. In lieu of any fractional share to which any Investor
would otherwise be entitled, Borrower will pay to such Investor in cash the
amount of the unconverted principal and interest balance of this Note that would
otherwise be converted into such fractional share. At its expense, Borrower,
will as soon as practicable thereafter, issue and deliver to each Investor, at
its principal office, or other address notified by each Investor to Borrower
from time to time, a certificate or certificates for the number of shares to
which the Investor is entitled upon such conversion. Upon such conversion of
this Note, the Borrower will be forever released from all of its obligations and
liabilities under this Note, to the extent of the conversion. Such conversion
may be exercised individually by each Investor but notwithstanding anything
herein to the contrary, each such conversion must be for the full amount of the
outstanding principal and accrued interest thereon payable to the Investor
exercising its rights under Section C.5 hereunder at the time of such exercise.
(c) Notwithstanding anything herein to the contrary, Section C.5(a)
of this Note shall not apply and this Note shall not be convertible into shares
of Common Stock as contemplated herein (i) until such time as Borrower has
obtained shareholder approval of the conversion feature of this Note as and to
the extent required by the rules of the National Association of Securities
Dealers; and (ii) upon the occurrence of any of the following: the consummation
of any transaction or series of transactions (collectively, the "Transaction"),
including without limitation, the sale, transfer or disposition of all or
substantially all of Borrower's assets or the merger of Borrower with or into,
or consolidation with, any other corporate entity, whereby the holders of
Borrower's voting securities prior to the Transaction do not hold more than 50%
of the voting securities of the surviving entity following the consummation of
the Transaction. Notice of any such Transaction shall be provided to the
Investors fourteen (14) calendar days prior to the consummation of any such
Transaction and, notwithstanding anything to the contrary contained elsewhere in
this Note, Investors may exercise their rights of conversion during such 14-day
period.
(d) In connection with the conversion of this Note pursuant to this
Section C.5, Borrower hereby covenants that: (i) it will hold a meeting of its
shareholders no later than August 31, 2001 (the "Shareholder Meeting"); and (ii)
the Note and all transactions contemplated by the Note (including the
convertibility feature set forth in this Section C.5) shall be an agenda item at
the first Shareholder Meeting held.
D. Security Interest.
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1. Grant of Security Interest. Upon the first Advance hereunder,
Borrower grants to the Investors a security interest in the Collateral, as
defined herein, to secure the payment of all of the outstanding indebtedness
hereunder (the "Secured Obligations") including, without limitation, principal,
accrued interest, other advances made under this Note and any attorneys' fees to
which the Investors are entitled under this Note.
2. Representations and Warranties Regarding Collateral. On the date of
this Note and as of the date of each Advance under this Note, Borrower does and
shall represent and warrant to the Investors, that as of each such date:
(a) Borrower is the true and lawful owner of the Collateral, having
good and marketable title thereto, free and clear of any and all Liens (as
defined in Section H.1) other than the Lien and security interest granted to the
Investors hereunder and Permitted Liens (as defined in Section H.1).
(b) The lien against the Collateral granted hereunder is and shall be
a first-priority lien against the Collateral and each portion thereof, subject
to Permitted Liens.
(c) Borrower shall not create or assume or permit to exist any such
Lien on or against any of the Collateral except as created or permitted by this
Note and Permitted Liens, and Borrower shall promptly notify the Investors of
any such other Lien against the Collateral and shall defend the Collateral
against, and take all such action as may be reasonably necessary to remove or
discharge, any such Lien.
(d) Borrower shall take all commercially reasonable actions necessary
to protect and preserve the Collateral which is used in its business in good
condition and repair, subject to ordinary wear and tear, and to preserve its
value and usefulness.
(e) No part of the Intellectual Property Collateral (as defined in
Section H.1) has been judged invalid or unenforceable, in whole or in part.
(f) No claim has been made that any part of the Intellectual Property
Collateral violates the rights of any third party.
(g) The Collateral consists of all assets which are required for the
conduct and operation of the business of Borrower as of the date of this Note.
(h) The Intellectual Property Collateral includes all of the
technology, know-how and proprietary information which are required for the
conduct and operation of the business of Borrower as of the date of this Note.
3. General Representations and Warranties. On the date of this Note and
as of the date of each Advance under this Note, Borrower does and shall
represent and warrant to the Investors, that as of each such date:
(a) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Borrower has the
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requisite corporate power and authority to own, operate or lease its properties
and to carry on its business as it is now being conducted and is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction in
which the nature of its business or the properties owned, operated or leased by
it makes such qualification, licensing or good standing necessary, except where
the failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not have a Material Adverse Effect.
The term "Material Adverse Effect," as used in this Note, means
any change in or effect (or any development that is reasonably likely to result
in any change or effect) on the business, business prospects, properties,
assets, operations, financial condition or results of operations of Borrower
that is materially adverse to Borrower taken as a whole.
(b) Authority Relative to this Note. This Note has been duly and
validly authorized, executed and delivered by Borrower and constitutes a valid
and binding obligation of Borrower enforceable against Borrower in accordance
with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(c) No Conflict; Required Filings and Consents. Except for the
approval of shareholders contemplated under Section C, none of the execution and
delivery of this Note by Borrower, the consummation by Borrower of the
transactions contemplated hereby or compliance by Borrower with any of the
provisions hereof will (i) conflict with or violate the articles of
incorporation or by-laws of Borrower, (ii) conflict with or violate any material
statute, ordinance, rule, regulation, order, judgment or decree applicable to
Borrower, or by which Borrower or its properties or assets may be bound, or
(iii) result in a violation or breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the creation
of any lien on any of the property or assets of Borrower pursuant to any
material agreement, a copy of which would be required to be filed as an exhibit
to the Company's Form 10-K or Form 10-Q filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(d) Consents. None of the execution and delivery of this Note by
Borrower, the consummation by Borrower of the transactions contemplated hereby
or compliance by Borrower with any of the provisions hereof will require any
consent, waiver, approval, authorization or permit of, or registration or filing
with or notification to (any of the foregoing being a "Consent"), any government
or subdivision thereof, or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational (a "Governmental Entity"), except for Consents the failure of
which to obtain or make would not have a Material Adverse Effect or adversely
affect the ability of Borrower to consummate the transactions contemplated
hereby; provided that the convertibility feature of this Note as set forth in
Section C which requires shareholder approval pursuant to the Nasdaq Stock
Market's shareholder approval provisions is obtained.
(e) Material Adverse Change. Since the date of the latest financial
statements filed by Borrower with the Commission prior to the date of this Note,
there has not been any event,
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occurrence or development that has resulted or, to the Company's knowledge, is
reasonably likely to result in a Material Adverse Effect.
(f) Legal Proceedings. There are no legal proceedings (including,
without limitation, any proceedings by or before any governmental or regulatory
authority or agency, or any arbitration proceedings) now pending or, to the best
knowledge of Borrower, threatened, against Borrower, which, if adversely
determined, could have a Material Adverse Effect.
4. Perfection of Security Interest. Borrower agrees to take all actions
required or requested by the Investors and reasonably necessary to perfect, to
continue the perfection of, and to otherwise give notice of, the Lien granted
hereunder, including, but not limited to, execution and filing of financing
statements and the filing of notices of security interests with the United
States Patent and Trademark Office.
E. Events of Default.
1. Definition of Event of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default" hereunder:
(a) Borrower's failure to perform, keep or observe any obligation
under this Note or any of the covenants contained in this Note which failure is
not cured within 30 days from the notice of the occurrence thereof delivered by
the Investors to Borrower.
(b) The lapse of 60 days following the institution of proceedings
against Borrower, or Borrower's filing of a petition or answer or consent
seeking reorganization or release, under the federal Bankruptcy Code, or any
other applicable federal or state law relating to creditor rights and remedies,
or Borrower's consent to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of Borrower or
of any substantial part of its property, or Borrower's making of an assignment
for the benefit of creditors, or the taking of corporate action in furtherance
of such action.
(c) Any representation or warranty of the Borrower made in this Note
proves untrue in any material respect as of the date of the issuance or making
thereof.
2. Rights and Remedies on Event of Default.
(a) During the continuance of an Event of Default, the Investors
shall have the right, themselves or through any of their agents, with notice to
Borrower (as provided below), as to any or all of the Collateral, by any
available judicial procedure, or without judicial process (provided, however,
that it is in compliance with the UCC), declare all obligations evidenced by
this Note immediately due and payable, cease advancing money or extending credit
to or for the benefit of Borrower under this Note, and to exercise any and all
rights afforded to a secured party under the UCC or other applicable law.
Without limiting the generality of the foregoing, the Investors shall have the
right to sell or otherwise dispose of all or any part of the Collateral, either
at public or private sale, in lots or in bulk, for cash or for credit, with or
without warranties or representations, and upon such terms and conditions, all
as the Investors, in their reasonable discretion, may deem advisable, and it
shall have the right to purchase at any such sale. Borrower agrees that a notice
sent
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at least fifteen (15) days before the time of any intended public sale or of the
time after which any private sale or other disposition of the Collateral is to
be made shall be reasonable notice of such sale or other disposition. The
proceeds of any such sale, or other Collateral disposition shall be applied,
first to the expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like, and to the Investors' reasonable attorneys'
fees and legal expenses, and then to the Secured Obligations and to the payment
of any other amounts required by applicable law, after which the Investors shall
account to Borrower for any surplus proceeds. If, upon the sale or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Investors are legally entitled, Borrower shall be liable
for the deficiency, together with interest thereon, and the reasonable fees of
any attorneys the Investors employ to collect such deficiency; provided, however
that the foregoing shall not be deemed to require the Investors to resort to or
initiate proceedings against the Collateral prior to the collection of any such
deficiency or other amount directly from Borrower.
(b) Borrower appoints the Meier and Bosch, and any officer, employee
or agent of Meier and Bosch, with full power of substitution, as Borrower's true
and lawful attorney-in-fact, effective as of the date hereof, with power, in its
own name or in the name of Borrower, during the continuance of an Event of
Default, to endorse any notes, checks, drafts, money orders, or other
instruments of payment in respect of the Collateral that may come into the
Investors' possession, to sign and endorse any drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to Collateral; to pay or discharge taxes or Liens at any time
levied or placed on or threatened against the Collateral; to demand, collect,
issue receipt for, compromise, settle and sue for monies due in respect of the
Collateral; to notify persons and entities obligated with respect to the
Collateral to make payments directly to the Investors; and, generally, to do, at
the Investors' option and at Borrower's expense, at any time, or from time to
time, all acts and things which the Investors deem necessary to protect,
preserve and realize upon the Collateral and the Investors' security interest
therein to effect the intent of this Note, all as fully and effectually as
Borrower might or could do; and Borrower hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney
shall be irrevocable as long as any of the Secured Obligations are outstanding.
(c) All of the Investors' rights and remedies with respect to the
Collateral, whether established hereby or by any other agreements, instruments
or documents or by law shall be cumulative and may be exercised singly or
concurrently.
(d) Except as set forth in Sections E.2(e) and E.2(f) below, the
rights of the Investors under this Note with respect to any Collateral and the
enforcement of the security interests and associated rights hereunder may be
exercised jointly by Investors or singly by any Investor representing two-thirds
(2/3) of the then outstanding principal sum of this Note.
(e) Upon the occurrence of an Event of Default, any Investor may
bring suit against Borrower to collect amounts due such Investor under this
Note.
(f) Any Investor may bring suit against Borrower to enforce the
provisions of this Note.
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F. Restrictions on Transfer and Compliance with Securities Act; Investor
Representations and Warranties.
1. Certificates. Certificates representing any of the shares of Common
Stock acquired pursuant to the provisions of this Note shall have endorsed
thereon the following legends, as appropriate.
(a) Such shares of Common Stock will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), nor qualified (if
necessary) under applicable state securities laws and consequently will have the
following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE
IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by any applicable state
securities laws.
(c) Each Investor, by acceptance hereof or by making any Advances
hereunder, agrees that this Note and the shares of Common Stock to be issued
upon conversion pursuant to the terms hereof are being acquired solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof and that it will not offer, sell or otherwise
dispose of this Note or any shares of Common Stock to be issued upon conversion
pursuant to the terms hereof except under circumstances which will not result in
a violation of the Securities Act or of applicable state securities laws.
(d) Each Investor, by acceptance hereof, represents that such
Investor is (i) an accredited investor within the meaning of Rule 501 under the
Securities Act and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
the Note and can bear the economic risk of such Investor's investment; (ii)
aware of the Company's business affairs and financial condition; and (iii) aware
that the Note has not been registered under the Securities Act in reliance upon
a specific exemption therefrom.
(e) Subject to the preceding, this Note may be transferred only upon
surrender of the original Note for registration of transfer, duly endorsed, or
accompanied by a duly executed written instrument of transfer in form
satisfactory to Borrower. Thereupon, a new Note for like principal amount and
interest will be issued to, and registered in the name of, the transferee.
Interest and principal are payable only to the Investors set forth on Exhibit A.
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G. Covenants.
1. Registration Rights. Upon receipt of the necessary approvals for the
convertibility feature of this Note set forth in Section C.5 above, Borrower
hereby covenants to enter into a registration rights agreement with each of the
Investors to provide for the registration of the shares of Common Stock into
which the Note is then convertible, in the form set forth on Exhibit C hereto.
H. Other Provisions.
1. Definitions. As used herein, the following terms shall have the
following meanings:
"Collateral" means the property described on Exhibit B attached
hereto.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Intellectual Property Collateral" means:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower now
or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, charge, claim
or other encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any agreement to give or refrain from giving a lien,
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mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, charge, claim or other encumbrance of any kind.
"Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations in part of the same.
"Permitted Liens" means: (i) Liens imposed by law, such as carriers',
warehousemen's, materialmen's and mechanics' liens, or Liens arising out of
judgments or awards against Borrower with respect to which Borrower at the time
shall currently be prosecuting an appeal or proceedings for review; (ii) Liens
for taxes not yet subject to penalties for nonpayment and Liens for taxes the
payment of which is being contested in good faith and by appropriate proceedings
and for which, to the extent required by generally accepted accounting
principles then in effect, proper and adequate book reserves relating thereto
are established by Borrower; (iii) purchase money security interests and liens
in connection with capital leases incurred in the ordinary course of business
(to the extent such liens are only on the leased property) or existing on after
acquired property at the time of its acquisition by the Borrower; (iv) liens
existing on property as of the date of this Note; (v) liens securing the
performance of bids, trade contracts, leases, surety bonds and the like; (vi)
leases and sublicenses granted to others in the ordinary course of business;
(vii) liens consisting of rights of set-off or bankers liens of a customary
nature; (viii) liens in connection with the establishment of receivable lines of
credit with commercial banks or other institutional lenders; (ix) liens
consisting of agreements to refrain from giving or creating Liens (other than
the Lien and security interest granted to the Investors hereunder) in connection
with joint venture agreements, strategic alliances and the like; (x) liens
granted in all of the Company's assets pursuant to the secured Promissory Note
dated July 30, 1999; (xi) liens granted in all of the Company's assets pursuant
to the secured Promissory Note dated February 22, 2000; (xii) liens granted in
all of the Company's assets pursuant to the secured Promissory Note dated April
14, 2000, (xiii) liens granted in all of the Company's assets pursuant to the
secured Promissory Note dated September 7, 2000; and (xiv) liens granted in all
of the Company's assets pursuant to the secured Promissory note, dated December
29, 2000.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
"UCC" means the Uniform Commercial Code in effect from time to time
in the relevant jurisdiction.
2. Governing Law; Venue. This Note shall be governed by the laws of the
State of California, without giving effect to conflicts of law principles.
Borrower and the Investors agree that all actions or proceedings arising in
connection with this Note shall be tried and litigated only in the state and
federal courts located in the City and County of Santa Clara, State of
California or, at the Investors' option, any court in which the Investors
determine it is necessary or appropriate to initiate legal or equitable
proceedings in order to exercise, preserve, protect or defend any of its rights
and remedies under this Note or otherwise or to exercise, preserve, protect or
defend its Lien, and the
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priority thereof, against the Collateral, and which has subject matter
jurisdiction over the matter in controversy.
3. Notices. Any notice or communication required or desired to be
served, given or delivered hereunder shall be in the form and manner specified
below, and shall be addressed to the party to be notified as follows:
If to Meier: Dieter Meier
c/o Data Sound
Wohllebgasse #6
CH-8001 Zurich, Switzerland
or
c/o Soundproof, Inc.
5180 Linwood Drive
Los Angeles, CA 90027
If to Bosch: Walter Bosch
Fraumunsterstr. 9
8001 Zurich, Switzerland
If to other Investors: The address set forth on the Counterpart
Signature Page hereto.
If to Borrower: Euphonix, Inc.
220 Portage Avenue
Palo Alto, California 94306
Attention: Steve Vining
Fax: (650) 846-1131
With a copy to: Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: John Roos, Esq.
Fax: (650) 493-6811
or to such other address as each party designates to the other by notice in the
manner herein prescribed. Notice shall be deemed given hereunder if (i)
delivered personally or otherwise actually received, (ii) sent by an
internationally recognized overnight delivery service or (iii) sent via telecopy
machine with a duplicate signed copy sent on the same day as provided in clause
(ii) above. Notice telecopied as provided in clause (iii) above shall be
effective upon receipt of such telecopy if the duplicate signed copy is sent on
the same date as such receipt pursuant to clause (ii) above. Notice given in any
other manner described in this section shall be effective upon receipt by the
addressee thereof; provided, however, that if any notice is tendered to an
addressee and delivery thereof is refused by such addressee, such notice shall
be effective upon such tender unless expressly set forth in such notice.
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4. Investors' Rights; Borrower Waivers. The Investors' acceptance of
partial or delinquent payment from Borrower hereunder, or the Investors' failure
to exercise any right hereunder, shall not constitute a waiver of any obligation
of Borrower hereunder, or any right of the Investors hereunder, and shall not
affect in any way the right to require full performance at any time thereafter.
Except as otherwise expressly provided herein, Borrower waives presentment,
diligence, demand of payment, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note. In any action on this Note, the Investors need not produce or file
the original of this Note, but need only file a photocopy of this Note certified
by the Investors be a true and correct copy of this Note in all material
respects.
5. Severability. Whenever possible each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision is prohibited by or invalid under applicable law, it shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of the provision or the remaining provisions of this
Note.
6. Amendment Provisions. Except for changes to Exhibit A to reflect the
amount of each Advance and the Pro Rata Share of each Investor, this Note may
not be amended or modified, nor may any of its terms be waived, except by a
written instrument signed by Borrower and the Investors who have advanced a
majority of the outstanding principal amount of this Note.
7. Binding Effect. This Note shall be binding upon, and shall inure to
the benefit of, Borrower and the holder hereof and their respective successors
and assigns; provided, however, that Borrower's rights and obligations shall not
be assigned or delegated without the Investors' prior written consent, given in
its sole discretion, and any purported assignment or delegation without such
consent shall be void ab initio.
8. Headings. Section headings used in this Note have been set forth
herein for convenience of reference only. Unless the contrary is compelled by
the context, everything contained in each section hereof applies equally to this
entire Note.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
10. No Usury. This Note is subject to the express condition that at no
time shall the Borrower be obligated or required to pay interest hereunder at a
rate which could subject the Investors to either civil or criminal liability as
a result of being in excess of the maximum rate which the Borrower is permitted
by law to contract or agree to pay. If, by the terms of this Note, the Borrower
is at any time required or obligated to pay interest at a rate in excess of such
maximum rate, the rate of interest under this Note shall be deemed to be
immediately reduced to such maximum rate and interest payable hereunder shall be
computed at such maximum rate and the portion of all prior interest payments in
excess of such maximum rate shall be applied and shall be deemed to have been
payments in reduction of the principal balance of this Note.
11. Attorneys' Fees. Should any litigation, enforcement or collection
action be commenced between any of the parties to this Note under or in
connection with this Note, the
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prevailing party in such litigation, enforcement or collection action shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum as and for its attorneys' fees in such litigation, enforcement or collection
action which shall be determined by the court in such litigation, enforcement or
collection action or in a separate action brought for that purpose. The
provisions of this section shall survive the entry of any judgement or award and
shall continue to apply with respect to any action to collect or recover any
such judgment or award.
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IN WITNESS WHEREOF, the Borrower and each of the Investors has caused
this Note to be duly executed on the date first written above.
EUPHONIX, INC.
By:
-------------------------------------
Name: Steve Vining
Title: Chief Executive Officer
INVESTORS
----------------------------------------
Dieter Meier
----------------------------------------
Walter Bosch
[SIGNATURE PAGE TO SECURED PROMISSORY NOTE]
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IN WITNESS WHEREOF, the Investor signing below has made an Advance on
the date set forth below.
INVESTOR
Name: __________________________________
Signature: _____________________________
Date: __________________________________
Amount: ________________________________
Address: _______________________________
_______________________________
_______________________________
[COUNTERPART SIGNATURE PAGE TO SECURED PROMISSORY NOTE]
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EXHIBIT A
The information set forth on this Exhibit A, as amended as of March 20,
2001, to the Secured Promissory Note, dated March 15, 2001, shall be amended to
reflect all Advances made to Borrower hereunder.
NAME OF INVESTOR DATE OF ADVANCE AMOUNT OF ADVANCE PRO RATA SHARE
---------------- --------------- ----------------- --------------
Walter Bosch March 9, 2001 $100,000 13.33%
Dieter Meier March 19, 2001 $650,000 86.67%
Totals: $750,000 100.00%
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EXHIBIT B
COLLATERAL DESCRIPTION ATTACHMENT
TO SECURED PROMISSORY NOTE
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:
(1) all accounts receivable, accounts, chattel paper, contract rights
(including, without limitation, royalty agreements, license agreements and
distribution agreements), documents, instruments, money, deposit accounts and
general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all investment property, including securities and securities
entitlements;
(2) all software, computer source codes and other computer programs
(collectively, the "Software Products"), and all common law and statutory
copyrights and copyright registrations, applications for registration, now
existing or hereafter arising, United States of America and foreign, obtained or
to be obtained on or in connection with the Software Products, or any parts
thereof or any underlying or component elements of the Software Products
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of the Investors to sue in
their own name and/or the name of the Debtor for past, present and future
infringements of copyright;
(3) all goods, including, without limitation, equipment and inventory
(including, without limitation, all export inventory);
(4) all guarantees and other security therefor;
(5) all trademarks, service marks, trade names and service names and the
goodwill associated therewith including, without limitation, the following:
Reel Feel(TM)
Clear Displays(TM)
Track Panner(TM)
SnapShot Recall(TM)
DSC(TM) (Digital Studio Controller)
Hyper-Surround(TM)
Total Automation(TM)
Mixview(TM)
(6) (a) all patents and patent applications filed in the United States
Patent and Trademark Office or any similar office of any foreign jurisdiction,
and interests under patent license agreements, including, without limitation,
the inventions and improvements described and claimed therein, (including,
without limitation, United States Patents Nos. 5524060, 5402501, 5399820,
5677959 and 6,057,829 and applications for United States patents for (i)
Multiple Driver Rotary Control for Audio Processors or Other Uses, (ii)
Functional Panel for Audio Mixer, and (iii) Plug-in Modules for
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Digital Signal Processor Functionalities), (b) licenses pertaining to any patent
whether Debtor is licensor or licensee, (c) all income, royalties, damages,
payments, accounts and accounts receivable now or hereafter due and/or payable
under and with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (d) the right (but
not the obligation) to sue for past, present and future infringements thereof,
(e) all rights corresponding thereto throughout the world in all jurisdictions
in which such patents have been issued or applied for, and (f) the reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
any of the foregoing (all of the foregoing patents and applications and
interests under patent license agreements, together with the items described in
clauses (a) through (f) in this paragraph are sometimes herein individually and
collectively referred to as the "Patents");
(7) all rights in and to (i) the on-air mixing consoles of the Series
CS3000B, (ii) mixer hardware software designs, (iii) Real Time(TM) software
design, and (iv) analog and digital audio hardware design expertise; and
(8) all products and proceeds, including, without limitation, insurance
proceeds, of any of the foregoing.
Notwithstanding the foregoing, the grant of a security interest as provided
herein shall not extend to, and the term "Collateral" shall not include, any
contractual, license or lease rights or interests in which Borrower is the
grantee, licensee or lessee thereunder to the extent that Borrower, whether by
law or by the terms of such contract, license or lease, is not permitted to
assign or grant a security in interest in its rights thereunder without the
consent of the other party thereto.
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EXHIBIT C
REGISTRATION RIGHTS AGREEMENT