EXHIBIT 4.43
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT, OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE ACT.
CONVERTIBLE PROMISSORY NOTE
$2,500,000 March 21, 2001
Pleasanton, California
FOR VALUE RECEIVED, Appiant Technologies, Inc., formerly doing business as
Nhancement Technologies Inc., a Delaware corporation (the "Company"), promises
to pay to the order of L. Thomas Baldwin III, or his assigns (the "Holder"), the
principal sum of Two Million Five Hundred Thousand Dollars (US$2,500,000) with
interest on the outstanding principal amount at the simple rate of 10% per
annum. Interest shall commence with the date hereof and shall continue on the
outstanding principal until converted or paid in accordance with paragraphs 1 or
2 of this Note.
1. Payment of Principal and Interest. Unless sooner converted in
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accordance with paragraph 2, the entire unpaid balance of principal and all
unpaid accrued interest shall become fully due and payable on May 31, 2001 (the
"Maturity Date"). The principal and accrued interest under this note (the
"Note") may be prepaid in whole or in part, in cash or in shares (as preferred
by Holder) of Common Stock, $0.01 par value per share, of the Company ("Common
Stock"), at any time and from time to time, without penalty, in the sole
discretion of the Company. If Holder prefers that such prepayment be made with
shares of Common Stock, the Common Stock shall be valued at the Conversion Price
set forth in Section 2(a). If the Company shareholders do not approve the
issuance of equity to Holder by May 31, 2001, the Holder will wait for such
approval, which the Company must reasonably pursue, and if the shareholders fail
to approve the issuance of equity, then Holder may receive cash in the amount of
$250,000.00 in addition to the repayment of the principal and unpaid accrued
interest at 25% per annum.
2. Conversion. As long as the Company's shareholders have approved the
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following conversion rights, the Holder shall have conversion rights as follows
(the "Conversion Rights"):
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(a) Right to Convert. The Holder may at any time on or after the
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Maturity Date convert the principal and accrued interest under this Note into
shares of Common Stock. The principal and accrued interest shall be converted
into shares of Common Stock at a conversion price (the "Conversion Price") equal
to eighty percent (80%) of the average of the five (5) days lowest closing
market price (which for purposes of this Note means the last highest bid price)
of the Common Stock on the Nasdaq SmallCap Market or Nasdaq National Market, as
applicable during the period beginning on March 16, 2001 and ending on the
Maturity Date (provided that such ending date shall be deemed to be the
conversion date in the case of a conversion by the Company of part or all of the
Note pursuant to Section 1 and prior to the Maturity Date). Further, if the
principal and accrued interest on this Note is not paid in full or converted
into Common Stock for any reason other than awaiting shareholder approval, and
otherwise in accordance with the terms hereof on or before the Maturity Date,
then the Conversion Price shall be reduced by 20 % for each full week that this
Note is not so paid or converted, provided that the Conversion Price shall not
in any event be reduced to less than $1.00. Notwithstanding the foregoing, such
conversion shall not result in an issuance of shares of Common Stock that
exceeds 19.9% of the number of shares of Common Stock then issued and
outstanding, without obtaining stockholder approval of such issuance, nor shall
it result in an issuance which would otherwise violate applicable Nasdaq rules.
To the extent that a conversion would result in an issuance in excess of such
19.9% amount, then the Company shall issue to the Holder that number of shares
of Common Stock equal to such 19.9% amount, and the remaining difference between
(x) the then outstanding principal and accrued interest and (y) the value of
such issuance of shares of Common Stock (based on the applicable Conversion
Price), shall be immediately due and payable in cash by the Company to the
Holder.
(b) Mechanism of Conversion. Before the Holder shall be entitled
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to convert the outstanding principal and accrued interest into shares of Common
Stock, the Holder shall surrender the Note at the office of this Company and
shall give written notice to this Company at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the Note, and the person
or persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
(c) No Fractional Shares. No fractional shares shall be issued
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upon conversion of the Note and the number of shares of Common Stock to be
issued shall be rounded down to the nearest whole share.
(d) Legends. It is understood that the certificates evidencing
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the Common Stock issued pursuant to the conversion of the Note may bear the
following legends:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
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(e) Purchase Entirely for Own Account. This Note is made with
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Holder in reliance upon such Holder's representation to the Company, that the
Common Stock to be received by the Holder upon conversion of the Note will be
acquired for investment for such Holder's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
(f) Release. Upon conversion of this Note in full and the payment
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of the amounts specified in this note, the Company shall be released from all
its obligations and liabilities under this Note.
3. New Warrants. In connection with this Note, the Company will issue,
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as of the date hereof, a Warrant to the Holder to purchase 462,963 (subject to
adjustment pursuant to the terms of the Warrant), shares of Common Stock. In
addition, if the Company has not completed, on or before the Maturity Date, an
equity investment in the Company in the aggregate principal amount of at least
Six Million Dollars ($6,000,000) (the "Financing"), and the Company has not
prepaid as set forth in paragraph 1 above, then the Company shall issue the
Holder an additional Warrant (the "Additional Warrant") to purchase that number
of shares of Common Stock equal to the product of (x) 15% of the loan amount
multiplied by (y) the number of full weeks, up to four weeks, between the
Maturity Date and the date that the Financing is completed. All Warrants issued
pursuant to this Section shall have an exercise price of $2.70 (the "Exercise
Price") (subject to adjustment pursuant to the terms of the Warrant or
Additional Warrant). Rights granted to the Holder with respect to the Warrants
issued pursuant to this Section shall include, among other things, standard
anti-dilution protection for stock splits, recapitalizations and the like. Each
Warrant issued pursuant to this Section shall expire seven (7) years from the
date of its respective issuance.
4. Events of Defaults; Acceleration. (a) An "Event of Default" under
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this Note shall exist if (i) the Company fails to pay when due any principal or
interest on this Note, (ii) the Company defaults in the performance of or
compliance with any material term, covenant or agreement contained in this Note,
if any, and such failure continues for 10 days after written notice thereof to
the Company, (iv) the Company shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Company seeking to adjudicate
it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or similar official for it or for any substantial part of its
property and assets and, in the case of any such proceeding instituted against
it (but not instituted by it) that is being diligently contested by it in good
faith, either such proceeding shall remain undismissed or unstayed for a period
of 60 days or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or any
substantial part of its property or assets) shall occur, (v) the Company shall
take any corporate action to authorize any of the actions set forth above in
clause (iv), or (vi) the Company shall default in the observance or performance
of any other agreement, term or condition contained in any bond, debenture, note
or other evidence of indebtedness, which is material to the Company and
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provides for material principal payments, and, in each event, the effect of such
failure or default is to cause the holder or holders thereof to accelerate the
indebtedness to become due prior to its stated date of maturity.
(b) If any Event of Default shall occur and be continuing, the
Holder may, at any time, at its option by notice to the Company, declare this
Note to be immediately due and payable.
(c) Upon this Note becoming due and payable under this Section 5,
this Note will forthwith mature and the entire unpaid principal amount of this
Note, plus all accrued and unpaid interest thereon, shall all be immediately due
and payable, in each and every case without presentment, demand, protect or
further notice of any kind, all of which are hereby waived by the Company.
5. Covenants of the Parties. The Parties covenant that no conversion
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in connection with this Note will occur until the Company's shareholders have
approved the issuance of such equity. The Parties further covenant with each
other that trading activities with respect to shares of the Company's Common
Stock will be in compliance with all applicable state and federal securities
laws, rules and regulations and rules and regulations of the trading market on
which the Company's Common Stock is listed. For so long as the Note is
outstanding, neither the Holder nor any of its affiliates will be in a net short
position with regard to the Common Stock of the Company in any accounts directly
or indirectly owned or controlled by the Investor.
6. Governing Law. The terms of this Note shall be construed in
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accordance with the laws of the State of California, as applied to contracts
entered into by California residents within the State of California, which
contracts are to be performed entirely within the State of California.
7. Amendment. Any term of this Note may be amended or waived with the
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written consent of Company and the Holder.
8. Severability. If any provision of this Note, or the application of
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such provision to any person or circumstance, is held invalid or unenforceable,
the remainder of this note, or the application of such provisions to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby.
9. Successors and Assigns. Except as otherwise provided herein, the
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terms and conditions of this Note shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties. Nothing in this
Note, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Note, except as expressly
provided in this Note.
10. Counterparts. This Note may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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11. Notices. Unless otherwise provided, any notice required or
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permitted under this Note shall be given in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, by
deposit with an overnight delivery service, or upon deposit with the United
States Post Office, by certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such party on the signature
page hereof or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties, or (ii) by electronic
facsimile (fax) to such party with receipt confirmed within three (3) days by
notice delivered in accordance with this Section 12.
12. Entire Agreement. This Note and the documents referred to herein
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constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
13. California Commissioner of Corporations. THE SALE OF THE
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SECURITIES WHICH ARE THE SUBJECT OF THIS NOTE HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND IN THE ABSENCE OF
AN EXEMPTION FROM SUCH QUALIFICATION REQUIREMENT, THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL. THE RIGHTS OF ALL PARTIES
TO THIS NOTE ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR
AN EXEMPTION FROM SUCH QUALIFICATION BEING APPLICABLE.
This Convertible Promissory Note is executed as of the day first above
written.
APPIANT TECHNOLOGIES, INC.
By: ____________________________________
Its: ___________________________________
L. THOMAS BALDWIN III
By: ____________________________________
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