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EXHIBIT 10.33
FORM OF CONVERTIBLE NOTE
THE SECURITIES REPRESENTED HEREBY AND ANY SHARES ISSUED UPON THE EXERCISE OF
CONVERSION RIGHTS HEREUNDER HAVE BEEN AND WILL BE ISSUED PURSUANT TO REGULATION
S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND
HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT. SUCH SECURITIES MAY NOT BE
TRANSFERRED, OFFERED OR SOLD PRIOR TO THE END OF THE FORTY (40) DAY PERIOD (THE
"RESTRICTED PERIOD") COMMENCING ON JULY 15, 1996 UNLESS SUCH TRANSFER, OFFER OR
SALE IS MADE IN AN "OFFSHORE TRANSACTION" AND NOT TO OR FOR THE ACCOUNT OF OR
BENEFIT OF A "U.S. PERSON" (AS SUCH TERMS ARE DEFINED IN REGULATION S) AND IS
OTHERWISE IN ACCORDANCE WITH THE REQUIREMENTS OF REGULATION S. THIS NOTE MAY NOT
BE CONVERTED INTO SHARES BY OR ON BEHALF OF ANY U.S. PERSON. FOLLOWING THE
EXPIRATION OF THE RESTRICTED PERIOD, THE SECURITIES REPRESENTED HEREBY AND ANY
SHARES ISSUED UPON THE EXERCISE OF CONVERSION RIGHTS MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A U.S. PERSON UNLESS THE
SECURITIES ARE REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
PINNACLE MICRO, INC.
8% CONVERTIBLE NOTE DUE JULY 11, 2001
THIS NOTE is one of a duly authorized issue of Convertible Notes of PINNACLE
MICRO, INC., a Corporation duly organized and existing under the laws of the
state of Delaware (the "Company") designated as its 8% Convertible Notes Due
July 11, 2001, in an aggregate principal amount of up to $10,000,000.
FOR VALUE RECEIVED, the Company promises to pay to __________ or the registered
holder hereof (the "Holder"), the principal sum of $______________ (United
States Dollars) on July 11, 2001 (the "Maturity Date"), and to pay interest on
the principal sum outstanding from time to time, semi-annually in arrears on the
first day of each December and June (the "Interest Payment Dates"), at the rate
of 8% per annum accruing from the date of issuance. Accrual of interest shall
commence on the first business day to occur after the date hereof until
repayment in full of the principal sum has been made or duly provided for.
Accrued and unpaid interest shall bear interest at the same rate from the due
date of the interest payment, until paid. The interest so payable will be paid
at the option of the Company, either in cash or in shares of common stock at the
then applicable conversion price (computed as described in paragraph 4 below) on
December 11 and June 11 to the person in whose name this Note (or one or more
predecessor Notes) is registered on the records of the Company regarding
registration and transfers of the Notes (the "Note Register") on the tenth day
prior to the Interest Payment Date. The principal of, and interest on, this Note
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address last appearing on the Note Register of the
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Company as designated in writing by the Holder from time to time. The Company
will pay the principal of and interest upon this Note on the due date, free of
any withholding or deduction of any kind, to the registered Holder of this Note
as of the tenth day prior to the due date and addressed to such Holder at the
last address appearing on the Note Register. The forwarding of such check shall
constitute a payment of principal and interest hereunder and shall satisfy and
discharge the liability for principal and interest on this Note to the extent of
the sum represented by such check plus any amounts so deducted.
This Note is subject to the following additional provisions:
1. The Notes are originally issuable in denominations of $50,000 and
integral multiples thereof.
2. All payments on account of the principal of and interest on this Note
and all other amounts payable under this Note (whether made by the Company
or any other person) to or for the account of the Holder hereunder shall be
made free and clear of and without reduction by reason of any present and
future income, stamp, registration and other taxes, levies, duties, costs
and charges whatsoever imposed, assessed, levied or collected by the United
States or any political subdivision or taxing authority thereof or therein,
together with interest thereon and penalties with respect thereto, if any,
on or in respect of this Note (all such taxes, levies, duties, costs and
charges being herein collectively called "United States Taxes"). Should any
such payment be subject to any United States Tax and the provisions of the
preceding sentence of this Paragraph 2 either cannot be effected or do not
result in the Holder actually receiving free and clear of all United States
Taxes an amount equal to the full amount provided under this Note, the
Company shall pay to the Holder such additional amounts as may be necessary
to ensure that the Holder receives a net amount equal to the full amount
which it would have received had such payment not been made subject to
United States Taxes unless withholding arises because holder has failed to
furnish the data described below in this paragraph 2. In addition to the
United States Taxes paid by the Company or additional amounts paid to the
Holder, in each case pursuant to the preceding provisions of this Paragraph
2 ("Additional Payments"), the Company shall also pay to the Holder upon
demand such additional amounts as may be necessary to compensate the
Holder, on an after-tax basis, for any tax or levy imposed or assessed by
any jurisdiction on or with respect to any such Additional Payments
(including any income taxes payable by the Holder with respect to
Additional Payments pursuant to the income tax laws of the jurisdiction of
its principal office or lending office or any political subdivision or
taxing authority thereof). Holder agrees to provide Company a Form W-8, a
certification under penalty of perjury, or a certificate from a financial
institution described in Section 871(h)(4)(B) of the Internal Revenue Code
of 1986 demonstrating that the Holder is not a United States person
3. If at any time there occurs a transaction in which in excess of 50% of
the Company's voting power is transferred (excluding any public or private
offering of Company equity securities), including any consolidation or
merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation), or any
other corporate reorganization or transaction or series of related
transactions, the Holders of this Note then outstanding may participate in
any such transaction as a class with common stockholders on the same basis
as if this Note had been converted one day prior to the effective date of
such transaction; provided, however, that at the option of the Holder of
this Note if such Holder may treat the effective date of any transaction
that occurs prior to July 11, 2001 as a redemption date and shall be
entitled to have the Company redeem this Note at a price equal to 122.5% of
the outstanding principal amount of this Note, plus accrued but unpaid
interest. Such holder shall be entitled to make such election at any time
up to 10 days prior to the effective date of the transaction. The Company
shall not effect any stock split, subdivision or combination with an
effective date within three (3) trading days preceding the effective date
of a merger or consolidation.
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The Company shall not make, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable in additional shares of common Stock, with an
effective date within three (3) trading days prior to the effective date of
a merger or consolidation.
4. The Holder of this Note is entitled, at its option, at any time
commencing sixty-one (61) days after the Closing Date as defined in the
Offshore Securities Subscription Agreement until maturity hereof to convert
one-third (1/3rd) or any lesser portion of the original principal amount
hereof which is at least $50,000 into shares of common stock of the Company
("Shares") at a conversion price for each share of common stock equal to
eighty-five percent (85%) of the average closing bid price for the five (5)
trading days immediately preceding the conversion date. Beginning
ninety-one (91) days after the Closing Date, an additional 1/3rd of the
original aggregate principal amount may be converted and the conversion
price for each share of common stock equal to eighty-two and one half
percent (82.5%) of the average closing bid price for the five (5) trading
days immediately preceding the conversion date, and beginning one hundred
and twenty-one (121) days after the Closing Date the remaining 1/3rd of the
original aggregate principal amount may be converted and the conversion
price for each share of common stock after such one hundred twenty-first
date shall be equal to eighty percent (80%) of the average closing bid
price for the five (5) trading days immediately preceding the conversion
date, respectively, provided, however, that in no event shall the Holder be
entitled to convert any portion of this Note in excess of that portion of
this Note upon conversion of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through
the ownership of the unconverted portion of this Note and (2) the number of
shares of Common Stock issuable upon the conversion of the portion of this
Note with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates of
more than 4.9% of the outstanding shares of Common Stock. For purposes of
the proviso to the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulations 13 D-G thereunder, except
as otherwise provided in clause (1) of such proviso). In the event of any
stock split, dividend, combination or similar event occurring after the
Conversion Date and prior to the issuance of the respective stock
certificates, the conversion price will be subject to appropriate
adjustment. For purposes of this section, the closing bid price of the
common stock shall be the closing bid price as reported by the National
Association of Securities Dealers, Inc. National Markets, or the closing
bid price in the over-the-counter market or, in the event the common stock
is listed on a stock exchange, the closing bid price on such exchange as
reported in The Wall Street Journal. Such conversion shall be effectuated
by surrendering the Notes to be converted to the Company, with the form of
conversion notice attached to the Note as Exhibit A, executed by the Holder
of the Note evidencing such Holder's intention to convert this Note, and
accompanied, if required by the Company, by proper assignment hereof in
blank. Interest accrued or accruing from the date of issuance to the date
of conversion on the amount so converted shall be paid in cash or at the
Company's option, in shares of common stock of the Company, calculated at
the same conversion price (as determined above), as would apply on the
conversion date of the principal amount being converted but using the
discount percentage applicable as of such date and shall constitute payment
in full of any such interest on the same terms as would otherwise apply to
the conversion of the principal amount hereof. No fractional Shares or
scrip representing fractions of Shares will be issued on conversion, but
the number of Shares issuable shall be rounded to the nearest whole Share.
The date on which notice of conversion is given ("Conversion Date") shall
be deemed to be the date on which the Holder notifies to the Company of its
intention to convert by delivery, by facsimile transmission or otherwise,
of a copy of the Conversion Notice (as defined below). Notice may be given
by facsimile to the Company at (714) 789-3045. This Note, together with the
original executed copy of the Notice of Conversion, shall be delivered to
the Company as soon as practicable following the date on which notice of
conversion is given as described above. Any unconverted principal amount
and accrued interest thereon shall at the
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maturity date be paid, at the option of the Holder, in either (a) cash or
(b) shares of common stock valued at a price equal to the average closing
bid price for the five trading days immediately preceding the maturity
date.
Upon the surrender of this Note, accompanied by a Notice of Conversion of
Convertible Note in the form attached hereto as Exhibit A, properly
completed and duly executed by the Holder (a "Conversion Notice"), the
Company shall issue and, within three (3) business days (the "Deadline")
after actual delivery of this Note with the Conversion Notice, deliver to
or upon the order of the Holder (1) that number of shares of Common Stock
for the portion of the Note converted as shall be determined in accordance
herewith and (2) a new Note in the form hereof for the balance of the
principal amount hereof, if any. Without in any way limiting the Holder's
right to pursue other remedies, including actual damages and/or equitable
relief, the parties agree that if delivery of the Common Stock issuable
upon conversion of this Note is more than one (1) business day after the
Deadline (other than a failure due to the circumstances described in the
second paragraph of Section 11 below, which failure shall be governed by
such Section ) the Company shall pay to the Holder $150 per day in cash,
for the first day beyond the Deadline and $500 per day for each day
thereafter that the Company fails to deliver such Common Stock. Such cash
amount shall be paid to Holder by the fifth day of the month following the
month in which it has accrued or, at the option of the Holder (by written
notice to the Company by the first day of the month following the month in
which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms
of this Note and such additional principal amount shall be convertible into
Common Stock in accordance with the terms of this Note.
The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing (i) the sum of (A) that
portion of the principal amount of the Note to be converted plus (B)
the "Conversion Date Interest" (as defined below), by (ii) the
Conversion Price in effect on the date the Conversion Notice is
delivered to the Company by the Holder. Conversion Date Interest means
the product of (i) the principal amount of the Note to be converted,
multiplied by (ii) a fraction (A) the numerator of which is the number
of days elapsed since the date of issuance of this Note and (B) the
denominator of which is 365, multiplied by (iii) .08.
5. At any time commencing one year after the Closing, Company may, by
written notice to Holder at Holder's registered address, prepay this Note
in whole or in part. Such notice shall be given at least ten (10) business
days prior to the payment date and on such date Company shall pay the
outstanding principal and all accrued interest on this Note, unless prior
to such payment date Holder has delivered a Notice of Conversion. Upon
delivery of a Notice of Conversion, the provisions of paragraph 4 shall
apply, except that no further interest shall accrue after the proposed
payment date.
6. No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the time, place, and rate, and in the coin or
currency, herein prescribed. This Note and all other Notes now or hereafter
issued on similar terms are direct obligations of the Company. This Note
ranks equally with all other Notes now or hereafter issued under the terms
set forth herein. In the event of any liquidation, reorganization, winding
up or dissolution repayment of this Note shall be subordinate in all
respects to any other indebtedness for borrowed money of the Company,
whether outstanding as of the date of this Note or hereafter incurred. Such
subordination shall extend without limiting the generality of the
foregoing, to all indebtedness of the Company to banks, financial
institutions, other secured lenders, equipment lessors and equipment
finance companies, but shall exclude trade debts; and any warrants, options
or other securities convertible into stock of the Company shall rank pari
passu with the Notes in all respects.
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7. The Company hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and
diligence in taking any action to collect amounts called for hereunder and
shall be directly and primarily liable for the payment of all sums owing
and to be owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any amount called
for hereunder.
8. In the event the Company at any time or from time to time after the
Closing Date makes, a dividend or other distribution to Holders of Common
Stock payable in securities of the Company other than shares of Common
Stock, then and in each such event provision shall be made so that the
Holders of Notes shall receive upon conversion thereof pursuant to Section
4 hereof, in addition to the number of shares of common Stock receivable
thereupon, the amount of such other securities of the Company to which a
Holder on the relevant record or payment date, as applicable, of the number
of shares of Common Stock so receivable upon conversion would have been
entitled, plus any dividends or other distributions which would have been
received with respect to such securities had such Holder thereafter, during
the period from the date of such event to and including the holder
conversion date retained such securities, subject to all other adjustments
called for during such period under this Note with respect to the rights of
the Holders of the Notes.
9. In the event that at any time or from time to time after the Closing
Date, the Common Stock issuable upon the conversion of the Note is changed
into the same or different number of shares of any class or classes of
stock, whether by re-capitalization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend or
reorganization provided for elsewhere in this Note or a merger or
consolidation, provided for in Paragraph 3), then and in each such event
each Holder of Notes shall have the right thereafter to convert such Note
into the kind of stock receivable upon such re-capitalization,
reclassification or other change by holders of shares of Common Stock, all
subject to further adjustment as provided herein. In such event, the
formulae set forth herein for conversion and redemption shall be equitably
adjusted to reflect such change in number of shares or, if shares of a new
class of stock are issued, to reflect the market price of the class or
classes of stock issued in connection with the above described transaction.
10. If at any time or from time to time after the Closing Date there is a
capital reorganization of the Common Stock (other than a re-capitalization,
subdivision, combination, reclassification exchange of shares provided for
elsewhere in this Note) then, as a part of such reorganization, provision
shall be made so that the Holders of the Notes shall thereafter be entitled
to receive upon conversion of the Notes the number of shares of stock or
other securities or property to which a holder of the number of shares of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Note with respect to the
rights of the Holders of the Notes after the reorganization to the end that
the provisions of this Note shall be applicable after that event and be as
nearly equivalent as may be practicable, including, by way of illustration
and not limitation, by equitably adjusting the formulae set forth herein
for conversion and redemption to reflect the market price of the securities
or property issued in connection with the above described transaction.
11. If one or more of the "Events of Default" as described in paragraph 12
shall occur, the Company agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by Holder in collecting
any amount due under this Note.
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12. If one or more of the following described "Events of Default" shall
occur:
(a) The Company shall default in the payment of principal or interest on
this Note; or
(b) Any of the representations or warranties made by the Company herein, in
the Offshore Securities Subscription Agreement dated as of July 11,1996
between the Company and the Holder (the "Subscription Agreement"), or
in any certificate or financial or other statements heretofore or
hereafter furnished by or on behalf of the Company in connection with
the execution and delivery of this Note or the Subscription Agreement
shall be false or misleading in any material respect at the time made;
or
(c) The Company shall fail to perform or observe any other covenant, term,
provision, condition, agreement or obligation of the Company under this
Note and such failure shall continue uncured for a period of thirty
(30) days after notice from the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
inability to pay its debts as they mature; (3) make an assignment for
the benefit of creditors or commence proceedings for its dissolution;
or (4) apply for or consent to the appointment of a trustee, liquidator
or receiver for it or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed for the Company or
for a substantial part of its property or business without its consent
and shall not be discharged within thirty (30) days after such
appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of
the whole or any substantial portion of the properties or assets of the
Company and shall not be dismissed within thirty (30) days thereafter;
or
(g) Any money judgment, writ or warrant of attachment, or similar process
except mechanics and materialmen's liens incurred in the ordinary
course of business in excess of Two Hundred Thousand Dollars ($200,000)
in the aggregate shall be entered or filed against the Company or any
of its properties or other assets and shall remain unsatisfied,
unvacated, unbonded or unstayed for a period of thirty (30) days
(unless such order provides for delayed payment) or in any event later
than five (5) days prior to the date of any proposed sale thereunder;
or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for
the relief of debtors shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed, stayed
or bonded within sixty (60) days after such institution or the Company
shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or admit the material allegations of, or default
in answering a petition filed in any such proceeding; or
(i) The company shall have its common stock delisted from an exchange or
NASDAQ.
Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holders of a majority of all Notes then outstanding (which waiver shall
not be deemed to be a waiver of any subsequent default) at the option
of the Holders of a majority of all Notes outstanding and in their
discretion, the Holder may consider this Note immediately due and
payable, without presentment, demand, protest or notice of any kind,
all of
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which are hereby expressly waived, anything herein or in any note or
other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein
or any other rights or remedies afforded by law. In such event, this
Note shall be redeemed by the Company at a redemption price per Note
equal to (i) the lesser of (a) 122.5% of the outstanding principal
amount due hereunder or (b) the maximum redemption premium which may be
permitted under the laws of Delaware (including any provision of law
relating to usury) and (ii) accrued and unpaid interest.
13. In the event that at any time on or after the date hereof and prior to
the anniversary of the Closing Date, trading in the shares on the Company's
Common Stock is suspended on the principal market or exchange for such
shares (including the NASDAQ Stock Market), for a period of five
consecutive trading days, other than as a result of the suspension or
trading in securities in general, or if such Shares are delisted, then, at
a Holder's option, the company shall redeem such Holder's Notes at a
redemption date designated by such Holder, and for the redemption price
provided in Paragraph 12.
14. Notwithstanding anything to the contrary contained herein, each
conversion notice shall contain a representation that, after giving effect
to the shares of the Company's Common Stock to be issued pursuant to such
conversion notice, the total number of shares of the Company's Common Stock
deemed beneficially owned by the Holder, together with all shares of the
Company's Common Stock deemed beneficially owned by the Holder's
"affiliates" as defined in Rule 144 of the Act, will not exceed 4.9% of the
total issued and outstanding shares of the Company's Common Stock. In
addition, notwithstanding anything to the contrary contained herein, the
amount of securities converted by Holder during any three month period
shall not exceed the amount provided in Rule 144(e)(1) of the Act.
15. The Holder may, subject to compliance with the Offshore Securities
Subscription Agreement and the provisions of Regulation S, without notice,
transfer or assign this Note or any interest herein integral multiples of
$50,000 or the entire outstanding balance (other than to a U.S. Person or
on behalf of a U.S. Person) and may mortgage, encumber or transfer any of
its rights or interest in and to this Note or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Holder) shall have the right to transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of
the rights of the Holder under this note. The Company may condition
registrations of transfers on the receipt of an IRS Form W-8 or an
equivalent certification under penalty of perjury in compliance with
Section 871(h)(4)(B) of the Internal Revenue Code of 1986.
16. For so long as any amount payable under this Note remains unpaid, the
Company shall furnish to the Holder the following information:
(a) No later than one hundred five (105) days following the end of
each fiscal year, beginning with the fiscal year ending
December 31, 1996, consolidated balance sheets, statements of
income and statements of cash flow and shareholders' equity of
the Company and its subsidiaries, if any, prepared in
accordance with generally accepted accounting principles
("GAAP"), and audited by a firm of independent public
accountants. The Company may satisfy this requirement by
delivering its report on Form 10-K for each such year.
(b) Within fifty-one (51) days after the end of each quarter
(except the fourth quarter) of each fiscal year, consolidated
balance sheets, statements of income and statements of cash
flow and shareholders' equity of the Company and its
subsidiaries. The Company may satisfy this requirement by
delivering its report on Form 10-Q for each such quarter.
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17. The Company covenants and agrees that until all amounts due under this
Note have been paid in full, by conversion or otherwise, unless the Holder
waives compliance in writing, the Company shall:
(a) Give prompt written notice to the Holder of any Event of
Default as defined in this Note or of any other matter which
has resulted in, or could reasonably be expected to result in,
a materially adverse change in its financial condition or
operations.
(b) Give prompt notice to the Holder of any claim, action or
proceeding which, in the event of any unfavorable outcome,
would or could reasonably be expected to have a material
adverse effect on the financial condition of the Company.
(c) At all times reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the
conversion of this Note such number of its duly authorized
shares of common stock as shall from time to time be
sufficient to effect the conversion of the outstanding
principal balance of this Note into shares of common stock. If
the Company does not have a sufficient number of shares of
Common Stock available to satisfy the Company's obligations to
a Holder of Notes upon receipt of a conversion notice or is
otherwise unable to issue such shares of Common Stock in
accordance with the terms of this Note (a "Conversion
Default"), from and after the fifth (5th) day following a
Conversion Default (which for all purposes shall be deemed to
have occurred upon the Company's receipt of the applicable
conversion notice), each Holder of the Notes shall have the
right to demand from the Company immediate redemption of the
Notes in cash at a redemption price per Note equal to 122.5%
of the outstanding principal amount of the Note, plus accrued
but unpaid interest on the Note; provided, however, that no
notice of redemption may be delivered by a Holder subsequent
to receipt by such holder of notice from the Company (sent by
overnight or 2-day courier with a copy sent by facsimile) of
availability of sufficient shares of Common Stock to permit
conversion (a "Post-Default Conversion") of all the Notes;
provided further that such right shall be reinstated if the
Company shall thereafter fail to perfect such Post-Default
Conversion by delivery of Common Stock certificates in
accordance with the applicable provision of Paragraph 4 hereof
and payment of all accrued and unpaid interest in cash with
respect thereto within five business days of delivery of the
notice of Post-Default Conversion. In addition to the
foregoing, upon a Conversion Default, the rate of interest on
all of the Notes shall, to the maximum extent of the law, be
increased by two percent (2%) (i.e., from 8% to 10% commencing
on the first day of the thirty (30) day period (or part
thereof) following a Conversion Default; an additional two
percent (2%) commencing on the first day of each of the second
and third such thirty (30) day periods (or part thereof); an
additional one percent (1%) on the first day of each
consecutive thirty (30) day period (or part thereof)
thereafter until such securities have been duly converted or
redeemed as herein provided. Any such interest which is not
paid when due shall, to the maximum extent permitted by law,
accrue interest until paid at the rate from time to time
applicable to interest on the Notes as to which the Conversion
Default has occurred.
(d) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or
mutilation of this Note and
(i) in the case of loss, theft or destruction, upon provision
of indemnity reasonably satisfactory to it and/or its transfer
agent, or
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(ii) in the case of mutilation, upon surrender and
cancellation of this Note, the Company at its expense will
execute and deliver a new Note, dated the date of the lost,
stolen, destroyed or mutilated Note.
18. The Holder of this Note, by acceptance hereof, agrees that this Note is
being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Note or the Shares of common stock issuable upon
exercise thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky laws or similar laws
relating to the sale of securities.
19. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will
not in any way be affected or impaired thereby.
20. This Note and the Offshore Securities Subscription Agreement and the
Registration Rights Agreement between the Company and the Holder
constitutes the full and entire understanding and agreement between the
Company and the Holder with respect to the subject hereof. Neither this
Note nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Company and the Holder.
21. This Note shall be governed by and construed in accordance with the
laws of the state of California.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
PINNACLE MICRO, INC.
DATED: ____________________________ BY: ______________________________
Name:
Title:
BUYER
DATED: ____________________________ BY: ______________________________
Name:
Title:
Buyer certifies under penalty of perjury that Buyer is neither a
citizen nor a resident of the United States and that Buyer's full name
and address are as set out below:
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
RE: A CONVERTIBLE NOTE OF PINNACLE MICRO, INC.
IN THE PRINCIPAL AMOUNT OUTSTANDING OF $ __________________.
The undersigned hereby irrevocably elects to convert $ __________________ of the
outstanding principal amount of the above referenced Note No._________ into
Shares of common stock of PINNACLE MICRO, INC. (the "Company") according to the
conditions hereof, as of the date written below. The undersigned represents and
warrants that (i) all of the requirements of Regulation S promulgated under the
Securities Act of 1933, as amended (the "Securities Act") applicable to the
undersigned have been complied with by the undersigned; (ii) the undersigned is
not a "U.S. Person" as defined in Regulation S and this note is not being
converted on behalf of any "U.S. Person"; and (iii) the undersigned has not
engaged in any transaction or series of transactions that is a part of or a plan
or scheme to evade the registration requirements of the Securities Act. Further,
the undersigned represents and warrants that after giving effect to the
conversion hereby requested, the undersigned will not beneficially own, together
with its affiliates, more than 4.9% of the Company's issued and outstanding
Common Stock, and that the conversion requested hereby does not, together with
any other conversions in the three months preceding this request, exceed the
amount provided in Rule 144(e)(1) of the Securities Act.
_________________________________________________
Date of Conversion*
_________________________________________________
Applicable Conversion Price [specify discount if
more than one discount percentage is available]
_________________________________________________
Signature
_________________________________________________
Name
_________________________________________________
Address:
_________________________________________________
_________________________________________________
* This original Note and Notice of Conversion must be received by the Company by
the fifth business day following the Date of Conversion.
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