EXHIBIT 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
AQUASEARCH, INC.
PROMISSORY NOTE
$___________ Kailua-Kona, Hawaii
July _, 1997
FOR VALUE RECEIVED, AQUASEARCH, INC., a Colorado corporation (the
"Company") hereby absolutely and unconditionally promises to pay to
____________________________ (the "Lender"), or order, the principal amount of
__________________________________ ($_________), together with simple interest
at the rate of ten percent (10%) per annum (calculated on the basis of twelve
30-day months). Accrued interest shall be due and payable in cash only at the
time the principal amount of this Note becomes due and owing.
This Note is one of a series of Notes issued pursuant to one or more Note
and Warrant Purchase Agreements dated as of July __, 1997 (as amended and in
effect from time to time, the "Purchase Agreements") by and among the Company,
the Lender, and certain other lenders named in EXHIBIT A to such Purchase
Agreements (the Lender and the certain other lenders are referred to herein as
the "Lenders"). All rights under this Note rank equally with all rights under
all other Notes, and no holder of this Note shall have rights senior to the
rights of the holders of all or any other Notes.
1. REPAYMENTS; PREPAYMENTS AND WARRANTS.
(a) This Note shall be due and payable on July __, 1999; PROVIDED,
HOWEVER, that, at the option of the Lender, this Note may be converted into
shares of the Company's Exchangeable Convertible Preferred Stock (the "Preferred
Stock") to be issued in a private placement to be effected through Auerbach,
Pollack & Richardson, Inc. ("APR") at a conversion price equal to the purchase
price
to be paid by purchasers in the Preferred Stock offering (the "Private
Placement"). In addition, the Company will issue the Lender a Common Stock
Purchase Warrant (the "Warrant") in substantially the form attached hereto as
EXHIBIT D to the Purchase Agreements. The Warrant will have an exercise
price of $0.50 per share and will have a term of three years from the date of
the Preferred Stock Closing. The number of shares of Common Stock underlying
the Warrant will be determined by either of two formulas. In the event that
Investor converts all principal and accrued interest on this Note into
Preferred Stock at the time of the Preferred Stock Closing, then the Warrant
would be exercisable for a number of shares equal to the dollar amount of the
Note, plus a number of shares equal to the dollar amount of any interest
accrued. In the event that the Lender elected not to converts all principal
and accrued interest on this Note into Preferred Stock at the time of the
Preferred Stock Closing, then the Warrant would be exercisable for a number
of shares equal to the dollar amount of this Note multiplied by 40%.
Warrants will not be issued for fractional shares. The number of shares of
Common Stock underlying the Warrants will be adjusted for any stock splits,
combinations or similar events. Any payment of this Note shall be made only
at the same time as the Company pays all other Notes issued pursuant to the
Purchase Agreement, with such payments to be made pro-rata in proportion to
the then outstanding principal amounts of such Notes. Interest shall
continue to accrue on this Note until such time as all principal and interest
due is paid in full.
(b) The Company may prepay this Note at any time, either in whole
or in part, without premium or penalty and without the prior consent of the
Lender. Any prepayment of this Note shall be made only at the same time as
the Company prepays all other Notes issued pursuant to the Purchase
Agreements, with such prepayments to be made pro-rata in proportion to the
then outstanding principal amounts of such Notes.
2. EVENTS OF DEFAULT; ACCELERATION.
(a) The principal amount of this Note is subject to prepayment in
whole or in part upon the occurrence and during the continuance of any of the
following events (each, an "Event of Default"): (i) failure to pay any
amount owing by the Company hereunder when due and payable, or (ii) the
initiation of any bankruptcy, insolvency, moratorium, receivership or
reorganization by or against the Company, or a general assignment of assets
by the Company for the benefit of creditors. Upon the occurrence of any
Event of Default, the entire unpaid principal balance of this Note shall be
immediately due and payable.
(b) No remedy herein conferred upon the Lender is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative and
in addition to every other remedy hereunder, and under the Purchase Agreement,
now or hereafter existing at law or in equity or otherwise.
3. NOTICES.
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(a) All notices, reports and other communications required or
permitted hereunder shall be in writing and may be delivered in person, by
telecopy with written confirmation, via overnight delivery service or U.S. mail,
in which event it may be mailed by first-class, certified or registered, postage
fully prepaid, addressed (i) if to a Lender, at such Lender's address set forth
in the Schedule of Investors attached as EXHIBIT A to the applicable Purchase
Agreement (or such other address as such Lender shall have furnished the Company
in writing) and (ii) if to the Company, at the address set forth at the
beginning of the Purchase Agreements (or such other address as the Company shall
have furnished the Lenders in writing), attention of Mark E. Huntley, Ph.D.,
President and Chief Executive Officer.
(b) Each such notice, report or other communication shall for all
purposes under this Note be treated as effective or having been given when
delivered if delivered personally or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid, or, if sent by telecopier with written confirmation, at the earlier
of (i) 24 hours after confirmation of transmission by the sending telecopier
machine or (ii) delivery of written confirmation.
4. MISCELLANEOUS.
(a) With the written consent of the record holders of a majority of
the principal amount of the Notes then outstanding, the obligations of the
Company and the rights of the holders under the Notes may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely), and with the same
consent the Company, when authorized by resolution of its Board of Directors,
may enter into a supplementary agreement for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Note; PROVIDED, HOWEVER, that no such waiver or supplemental agreement
shall reduce the above percentage of principal amount, the holders of which are
required to consent to any waiver or supplemental agreement, without the consent
of the record or beneficial holders of all of the Notes, nor increase the
obligations of any holder of a Note without such holder's written consent. Upon
the effectuation of each such waiver, consent, agreement, amendment or
modification, the Company shall promptly give written notice thereof to the
record holders of the Notes who have not previously consented thereto in
writing. Neither this Note nor any provisions hereof may be changed, waived,
discharged or terminated orally, but only by a signed statement in writing.
(b) No failure or delay by the Lender to exercise any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude any other right, power or privilege. The
provisions of this Note are severable and if any one provision hereof shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
invalidity or unenforceability shall affect only such provision in such
jurisdiction. This Note expresses the entire understanding of the parties with
respect to the transactions contemplated hereby. The Company and every endorser
and guarantor of this Note regardless of the time, order or place of signing
hereby waives presentment, demand, protest and notice of every kind, and assents
to any
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extension or postponement of the time for payment or any other indulgence, to
any substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable.
(c) If Lender retains an attorney for collection of this Note, or if
any suit or proceeding is brought for the recovery of all, or any part of, or
for protection of the indebtedness respected by this Note, then the Company
agrees to pay on demand all costs and expenses of the suit or proceeding, or any
appeal thereof, incurred by the Lender, including without limitation, reasonable
attorneys' fees.
(d) This Note shall for all purposes be governed by, and construed in
accordance with the laws of the State of California (without reference to
conflict of laws).
(e) This Note shall be binding upon the Company's successors and
assigns, and shall inure to the benefit of the Lender's successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
duly authorized officer to take effect as of the date first hereinabove written.
AQUASEARCH, INC.
By:
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Mark E. Huntley, Ph.D.
President and Chief Executive Officer
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