Exhibit 4.12.1
THIS CONVERTIBLE PROMISSORY NOTE HAS BEEN, AND ANY SECURITIES
ISSUED UPON CONVERSION PURSUANT TO THE TERMS HEREOF WILL BE,
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS
CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES ISSUED UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE ACT OR
ANY STATE SECURITIES LAW, AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR THOSE LAWS
OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
EPIXTAR CORP./VOXX CORPORATION
UNSECURED 5% JOINT AND SEVERAL SUBORDINATED CONVERTIBLE PROMISSORY NOTE
Principal Amount: $[PRINCIPAL AMOUNT] ___________, 2004
This Note (this "Note") is one of a duly authorized issue of unsecured
subordinated Notes (collectively, the "Notes") of the joint and several obligors
Epixtar Corp., a Florida corporation ("Epixtar"), and Voxx Corporation, a
Florida corporation ("Voxx") (Epixtar and Voxx may hereafter be collectively
referred to as the "Joint Obligors" or the "Issuer"). The Notes are designated
as the 2004 Unsecured 5% Joint and Several Subordinated Convertible Promissory
Notes, in an aggregate maximum principal face value for all Notes of this series
of Twelve Million Dollars ($12,000,000) (or Thirteen Million Eight Hundred
Thousand Dollars ($13,800,000.00) if the entire over-allotment option is sold),
subject to increase as set forth below. In addition, the aggregate maximum
principal face value for all Notes of this series may be increased by up to an
additional $1,000,000 if the holders of our 8% Convertible Promissory Notes due
2005 elect to exchange their notes for these Notes.
FOR VALUE RECEIVED, each of Epixtar and Voxx jointly and severally
promises to pay to the registered holder
hereof and its successors and assigns (hereinafter called the "Holder"), at such
address as the Holder may designate in writing to Issuer, the principal sum of
[INSERT PRINCIPAL AMOUNT] DOLLARS [($___________)] plus all accrued interest
then owing hereunder in lawful money of the United States of America on or
before the Maturity Date (as defined below), unless this Note is converted into
securities of Issuer in accordance with Section 7 hereof. For purposes of this
Note, the term "Maturity Date" shall mean the earliest to occur of: (i) May 14,
2007; (ii) the date on which all principal plus accrued and unpaid interest
under this Note is due and payable pursuant to Section 5.2; or (iii) the
occurrence of a Change of Control Event (as defined in Section 6.1).
Each of Epixtar and Voxx are jointly and severally liable for the
repayment of this Note which is an unsecured, subordinated obligation of each of
Epixtar and Voxx.
The following is a statement of the rights of the Holder of this Note
and the terms and conditions to which this Note is subject, and to which the
Holder, by acceptance of this Note, agrees:
SECTION 1. SUBSCRIPTION AGREEMENT. This Note is subject to the terms
and conditions of that certain Subscription Agreement dated as of the date
hereof by and between Issuer and the initial Holder (the "Subscription
Agreement"), and capitalized terms not expressly defined herein shall have the
meaning ascribed to such terms in the Subscription Agreement.
SECTION 2. INTEREST. Interest shall accrue on the unpaid principal
amount of this Note at the rate of five percent (5%) per annum (the "Base
Interest Rate"). Interest shall be computed for the actual number of days
elapsed on the basis of a 360-day year composed of 30-day months. Accrued
interest on this Note shall be payable semi-annually in arrears on June 30th and
December 31st of each year, with the first interest payment due on December 31,
2004; provided, however, any accrued but unpaid interest on this Note shall be
due and payable in full on the Maturity Date. The Base Interest Rate shall
increase by an additional five percent (5%) per annum (or the highest rate
permitted by applicable law, whichever is less) if Issuer shall fail to effect
the Voxx Spin-Off (as defined in Section 6.1) or consummate the Voxx IPO (as
defined in Section 6.1) on or prior to the one year anniversary date of the
initial issuance of the Notes (the "One Year Anniversary Date"). In addition to
the rights of the Holder set forth in Section 5 below, upon the occurrence of
any Event of Default (as defined in Section 5.1), interest shall accrue, on the
outstanding principal indebtedness under this Note and all accrued and unpaid
interest, at a default interest rate (the "Default Interest Rate") (computed on
the same basis as set forth above) equal to the Base Interest Rate then in
effect plus ten percent (10%) per annum (or the highest rate permitted by
applicable law, whichever is less) for the period commencing the date upon which
such Event of Default occurred until such time as the Event of Default is cured
or otherwise remedied. The Default Interest Rate shall be payable monthly and
shall be in lieu of the interest otherwise payable hereunder during the period
for which it applies.
SECTION 3. AFFIRMATIVE COVENANTS. So long as this Note remains
outstanding, each Issuer covenants and agrees that:
3.1. SEC Filings. Epixtar will furnish to the Holder:
(a) within 90 days after the end of each fiscal year, beginning with
the fiscal year ending December 31, 2004, a copy of Epixtar's Annual Report on
Form 10-KSB, as filed with the Securities and Exchange Commission ("SEC");
(b) within 45 days after the end of each fiscal quarter (except for
the fourth quarter), a copy of Epixtar's Quarterly Report on Form 10-QSB, as
filed with the SEC; and
(c) within five days of filing thereof with the SEC, any amendments
to either of the foregoing reports.
3.2. Notice of Event of Default. Issuer will provide the Holder with
prompt written notice upon the occurrence of any Event of Default.
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3.3. Notice of Certain Events. Issuer will provide the Holder with not
less than 20 nor more than 30 days' advance written notice before the earlier of
the establishment of any record date in connection with, or any closing or
effective date for, any of the events described in Sections 8.1(a) - (c) hereof
or any Change of Control Event; provided, however, that (i) in the event such
information would be material nonpublic information, Issuer shall first notify
the Holder of such and permit the Holder to waive notification of such event and
(ii) in the event the Holder does not waive such notification, Issuer may
require the Holder to agree to keep such information confidential as a condition
to such notification.
3.4. Maintenance of Corporate Existence and Rights. Issuer will at all
times do or cause to be done all things necessary to maintain, preserve and
renew the corporate existence of Issuer and each material subsidiary and its
related rights, patents and franchises; provided, however, that nothing
contained in this Section 3.4 shall require Issuer or any subsidiary to
maintain, preserve or renew any right, patent or franchise not necessary or
desirable in the conduct of the business of Issuer or such subsidiary.
3.5. Insurance. Issuer and its subsidiaries will maintain or cause to
be maintained insurance against loss or damage of the kinds customarily insured
against by corporations similarly situated (including officer's and director's
liability), with reputable insurers, in such amounts, with such deductibles and
by such methods as shall be adequate, and in any event in amounts not less than
amounts generally maintained by other companies engaged in similar businesses.
Issuer shall further promptly provide to the holders of the Notes copies of all
material notices received from or sent to any of its or its subsidiaries'
insurers together with copies of all material correspondence regarding any
potential or actual termination of such insurance.
3.6. Books and Records. Issuer and its subsidiaries will at all times
keep true books of records and accounts in which full and correct entries will
be made of all its business transactions, and will reflect in its consolidated
financial statements adequate accruals and appropriations to reserves, all in
accordance with generally accepted accounting practices (subject to customary
and reasonable year-end adjustments).
3.7. Compliance with Law. Issuer and its subsidiaries will comply with
all applicable statutes, rules, regulations, orders and restrictions of the
United States of America, foreign countries, states and municipalities and of
any governmental department, commission, board, regulatory authority, bureau,
agency, and instrumentality of the foregoing, and of any court, arbitrator or
grand jury, in respect of the conduct of their respective businesses and the
ownership of their properties, except such as are being contested in good faith
by appropriate proceedings, unless the penalty for noncompliance would not have
a material adverse effect on the properties, business, condition (financial or
otherwise) or prospects of Issuer and its subsidiaries taken as a whole.
SECTION 4. Negative Covenants of Issuer. Issuer hereby agrees that, so
long as at least fifty percent (50%) of the principal amount of the originally
issued Notes are outstanding, it will not nor will it permit any of its
subsidiaries to:
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4.1. Indebtedness for Borrowed Money. Incur, or permit to exist, any
(i) additional secured or unsecured indebtedness for borrowed money of Voxx or
(ii) any additional indebtedness for borrowed money of Epixtar which is senior
to the Notes, except, in the case of clauses (i) and (ii) above, for Permitted
Indebtedness. The term "Permitted Indebtedness" means the incurrence of
indebtedness for borrowed money of Epixtar or Voxx (other than clause (e) below
which shall only apply to Epixtar) (a) in connection with the factoring of its
receivables; (b) represented by working capital lines of credit consistent with
its ordinary course business operations; (c) in connection with its lease or
acquisition of equipment to be used in its ordinary course business operations;
(d) in connection with its execution and delivery of real property leases in
accordance with its ordinary course business operations; (e) that is due and
owing to the holders of Senior Debt (as defined in Section 9(a) below); (f) in
connection with future loans made to Epixtar or Voxx from Laurus Master Fund,
Ltd. ("Laurus"); and (g) in connection with acquisitions approved by a majority
of the independent members of its Board of Directors.
4.2. Contingent Liabilities. Assume, endorse, be or become liable for
or guarantee the indebtedness or obligations of any Person, contingently or
otherwise, excluding however, (i) the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business and (ii) any guarantee
of the Senior Debt (including any future loans made to Epixtar or Voxx by
Laurus);
4.3. New Securities. Create or issue any new class or series of any
debt or equity security of Epixtar or Voxx (or any security which is convertible
into any such securities, including any class of preferred stock) which has a
preference senior to the Notes with respect to voting, interest, dividends,
liquidation preference or redemption (other than the creation and issuance of
any new debt security to the holders of Senior Debt);
4.4. Sale or Encumbrance of Assets. Effect any sale, lease, assignment,
encumbrance, transfer or other conveyance of all or substantially all of the
assets of Epixtar or Voxx; provided, however, Epixtar and Voxx may grant
security interests in their assets, and pledge any stock owned by them, to
secure the indebtedness owed to the holders of the Senior Debt (which, for the
avoidance of doubt, shall include any future loans made to Epixtar or Voxx by
Laurus);
4.5. Mergers. Effect any merger, share transfer, reorganization or
consolidation involving Epixtar or Voxx or enter into any transaction or series
of related transactions, in any such case, in which more than fifty percent
(50%) of the voting power of Epixtar or Voxx is disposed of;
4.6. Dividends and Distributions. Pay dividends or make any other
distribution on shares of the capital stock of either Epixtar or Voxx, except
for dividends or distributions contemplated by the Notes, the Senior Debt or
other indebtedness or securities outstanding on the date of initial issuance of
the Notes; or
4.7. No Impairment. Make or enter into any agreement or become
obligated to do any of the actions prohibited by Sections 4.1 through 4.6 above.
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Notwithstanding anything contained in this Section 4, each Issuer shall be
permitted, and the consent of the holders of Notes shall not be required, to
effect the Voxx IPO or the Voxx Spin-Off.
SECTION 5. EVENTS OF DEFAULT
5.1. Definition of Event of Default. The occurrence of any of the
following shall constitute an "Event of Default" under this Note (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) subject to the provisions of Section 9, a default in the payment
of all or any part of the principal or interest due under this Note as and when
the same shall become due and payable, at maturity, by declaration as permitted
hereunder, upon acceleration or otherwise; provided, that Issuer shall have an
additional five (5) days to cure any failure to make an interest payment when
due;
(b) any representation, warranty, certificate, or other statement
(financial or otherwise) made or furnished by or on behalf of Issuer to the
Holder in writing in connection with this Note or the Subscription Agreement
shall be false, incorrect, incomplete or misleading in any material respect when
made or furnished;
(c) the failure to observe any covenant set forth herein (other than
a covenant covered by clause (a) above) (which failure is not cured within 20
days after receipt by Issuer of notice of such failure);
(d) an acceleration of the stated maturity of any indebtedness of
Issuer in an amount greater than Two Million Dollars ($2,000,000) in aggregate
principal amount (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by Issuer of notice of such acceleration);
(e) a judgment or order (not covered by insurance) for the payment
of money shall be rendered against Issuer in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000) in the aggregate for all such judgments or orders
(treating any deductibles, self insurance or retention as not so covered) and
such judgment or order shall continue unsatisfied and unstayed for a period of
20 days; or
(f) Issuer shall have applied for or consented to the appointment of
a custodian, receiver, trustee or liquidator, or other court-appointed fiduciary
of all or a substantial part of its properties; or a custodian, receiver,
trustee or liquidator or other court appointed fiduciary shall have been
appointed with the consent of Issuer; or Issuer is generally not paying its
debts as they become due by means of available assets or is insolvent, or has
made a general assignment for the benefits of its creditors; or Issuer files a
voluntary petition in bankruptcy, or a petition or an answer seeking
reorganization or an arrangement with its creditors or seeking to take advantage
of any insolvency law, or an answer admitting the material allegations of a
petition in any bankruptcy, reorganization or insolvency proceeding or has taken
action for the purpose of effecting any of the foregoing; or if, within 60 days
after the commencement of any proceeding against Issuer seeking any
reorganization, rehabilitation, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the Federal bankruptcy code or
similar order under future similar legislation, the appointment of any trustee,
receiver, custodian, liquidator, or other court-appointed fiduciary of Issuer or
of all or any substantial part of its properties, such order or appointment
shall not have been vacated or stayed on appeal or if, within 60 days after the
expiration of any such stay, such order or appointment shall not have been
vacated (all such events, collectively "Insolvency Events").
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5.2. Rights of Holder Upon an Event of Default. Upon the occurrence or
existence of an Event of Default, holders representing a majority-in-interest of
the then outstanding Notes, by notice in writing to Issuer (the "Acceleration
Notice"), may declare the principal amount of this Note and the other Notes and
all accrued and unpaid interest due and owing thereon to be due and payable
immediately, without presentment, demand, protest or any notice of any kind, all
of which are hereby expressly waived; provided that if an Insolvency Event
occurs, the principal amount of this Note and the other Notes and all accrued
and unpaid interest shall become and be immediately due and payable without any
declaration or other act on the part of the Holder and without the need for any
consent thereto. Upon the occurrence of any Event of Default, the Holder may, in
addition to declaring all amounts due hereunder to be immediately due and
payable as provided in the preceding sentence, pursue any available remedy,
whether at law or in equity. If an Event of Default occurs, Issuer shall pay to
the Holder the reasonable attorneys' fees and disbursements and all other
out-of-pocket costs incurred by the Holder in order to collect amounts due and
owing under this Note or otherwise to enforce the Holder's rights and remedies
hereunder. This Section 5.2 shall be subject to the provisions of Section 9 of
this Note.
SECTION 6. CHANGE OF CONTROL.
6.1. Definition of Change of Control. The occurrence of any of the
following shall constitute a "Change of Control Event" under this Note (whatever
the reason for such Change of Control Event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) any person or group becomes, directly or indirectly, in one or a
series of transactions, the beneficial owner of shares of voting stock of
Epixtar or Voxx (i) representing more than 50% or more of the total voting power
of all outstanding classes of voting stock of Epixtar or Voxx, or (ii) having
the power, directly or indirectly, to elect a majority of the Board of Directors
of Epixtar or Voxx;
(b) the merger or consolidation of Epixtar or Voxx with or into any
other entity which results in the stockholders of Epixtar or Voxx owning less
than 50.1% of the outstanding common stock of the surviving entity following the
consummation of such transaction;
(c) the sale by Epixtar or Voxx of all or substantially all of its
assets; or
(d) the liquidation or dissolution of Epixtar or Voxx.
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Notwithstanding the foregoing, a Change of Control Event shall not
include: (i) any reorganization or reincorporation of Epixtar and its
subsidiaries so long as such reorganization or reincorporation does not involve
an unaffiliated third party or does not result in the stockholders of Epixtar
owning less than 50.1% of the outstanding common stock of the surviving entity
following the consummation of such transaction, (ii) the pro rata distribution
to Epixtar's stockholders of a percentage (such percentage to be agreed upon by
Epixtar and the Placement Agent) of the shares of common stock, par value $.001
per share (the "Voxx Common Stock"), of Voxx (the "Voxx Spin-Off"), (iii) the
consummation of an initial public offering of Voxx Common Stock (the "Voxx
IPO"), or (iv) any event described above which holders of at least a
majority-in-interest of the then outstanding Notes notify the Issuer in writing
that they desire not to be deemed a Change of Control Event.
6.2. Rights of Holder Upon Change of Control Event. Subject to the
provisions of Section 9, upon the occurrence of a Change of Control Event, all
outstanding principal and accrued but unpaid interest under this Note shall
automatically become due and payable immediately, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived.
SECTION 7. CONVERSION.
7.1. Optional Conversion Prior to the One Year Anniversary Date. (a) At
any time from and after the date of issuance of this Note and prior to the One
Year Anniversary Date, the Holder may convert all, but not less than all, of the
principal and accrued interest outstanding under this Note into fully paid and
non-assessable shares of Epixtar's common stock, $0.001 par value per share (the
"Epixtar Common Stock"), at a conversion price equal to the volume
weighted-average price of the Epixtar Common Stock for the thirty (30) trading
day period immediately preceding the date of conversion of this Note; provided,
that, the volume weighted-average price for such thirty (30) day period equals
or exceeds Two Dollars and Twenty Five Cents ($2.25)(as subject to adjustment
for stock splits, stock combinations and stock dividends with respect to the
Epixtar Common Stock) (the "Epixtar Conversion Price I"). Such conversion shall
be effected by the Holder sending Epixtar a written notice of conversion (which
notice shall specify the outstanding principal and accrued and unpaid interest
which is being converted and the number of shares to be received upon such
conversion) and this Note for cancellation. Within three (3) business days after
receipt of a proper conversion notice from the Holder, Epixtar shall issue a
certificate to the Holder representing the number of shares of Epixtar Common
Stock (or such other securities issuable upon conversion of this Note) issuable
upon conversion of this Note in accordance with the Holder's conversion notice.
Upon conversion of this Note, only whole shares of Epixtar Common Stock (or any
other securities issuable upon conversion of this Note) shall be issued. Any
remainder due hereunder which is insufficient to purchase a whole share of
Epixtar Common Stock (or any other securities issuable upon conversion of this
Note) shall be paid by Issuer in cash. In the event the Holder has not converted
this Note into Epixtar Common Stock prior to the One Year Anniversary Date in
accordance with this Section 7.1(a), then the right to convert this Note
pursuant to this Section 7.1(a) shall automatically terminate. For the avoidance
of doubt, in the event that the Holder converts this Note into Epixtar Common
Stock in accordance with this Section 7.1(a), then the right of the Holder to
receive the Voxx Warrants (as defined in Section 7.3(b) below) shall
automatically terminate.
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(b) In the event the Holder elects to convert all, but not less than
all, of the principal and accrued interest outstanding under this Note into
Epixtar Common Stock prior to the One Year Anniversary Date in accordance with
Section 7.1(a), then the Holder shall be entitled to receive, in addition to the
shares of Common Stock issuable upon conversion of this Note in accordance with
Section 7.1(a), a warrant (the "Epixtar Conversion I Warrant") to purchase the
number of shares of Epixtar Common Stock equal to fifty percent (50%) of the
then outstanding principal amount of this Note divided by the Epixtar Conversion
Price I. The Epixtar Conversion I Warrant shall have a five year term and shall
be exercisable at an exercise price equal to the Epixtar Conversion Price I at
the time of conversion of this Note in accordance with Section 7.1(a). The
Epixtar Conversion I Warrant shall contain certain weighted-average and other
customary anti-dilution provisions but shall not provide for the cashless
exercise of the Epixtar Conversion I Warrant.
7.2. Optional Conversion Following the One Year Anniversary Date. (a)
If Issuer shall fail to consummate the Voxx IPO or Voxx Spin-Off on or prior to
the One Year Anniversary Date, then the Holder shall have the right, at any time
following the One Year Anniversary Date and prior to the consummation of the
Voxx IPO or Voxx Spin-Off, to convert all, but not less than all, of the
principal and accrued interest outstanding under this Note into fully paid and
non-assessable shares of Epixtar Common Stock at a conversion price equal to the
greater of (i) a twenty-five percent (25%) discount to the volume
weighted-average price of the Epixtar Common Stock for the thirty (30) trading
day period immediately preceding the One Year Anniversary Date, and (ii) One
Dollar ($1.00) (the "Epixtar Conversion Price II" and together with the Epixtar
Conversion Price I, the "Epixtar Conversion Price"). Such conversion shall be
effected by the Holder sending Epixtar a written notice of conversion (which
notice shall specify the outstanding principal and accrued and unpaid interest
which is being converted and the number of shares to be received upon such
conversion) and this Note for cancellation. Within three (3) business days after
receipt of a proper conversion notice from the Holder, Epixtar shall issue a
certificate to the Holder representing the number of shares of Epixtar Common
Stock (or such other securities issuable upon conversion of this Note) issuable
upon conversion of this Note in accordance with the Holder's conversion notice.
Upon conversion of this Note, only whole shares of Epixtar Common Stock (or any
other securities issuable upon conversion of this Note) shall be issued. Any
remainder due hereunder which is insufficient to purchase a whole share of
Epixtar Common Stock (or any other securities issuable upon conversion of this
Note) shall be paid by Issuer in cash. For the avoidance of doubt, in the event
that the Holder elects to convert this Note into Epixtar Common Stock in
accordance with this Section 7.2(a), then the right of the Holder to receive the
Voxx Warrants shall automatically terminate.
(b) If Issuer shall fail to consummate the Voxx IPO or Voxx Spin-Off on
or prior to the One Year Anniversary Date and the Holder shall not have elected
to convert this Note into Epixtar Common Stock in accordance with Section 7.1(a)
prior to the One Year Anniversary Date, then the Holder shall automatically
receive on the One Year Anniversary Date, a warrant (the "Epixtar Conversion II
Warrant" and together with the Epixtar Conversion I Warrant, the "Epixtar
Warrants") to purchase the number of shares of Epixtar Common Stock equal to
fifty percent (50%) of the then outstanding principal amount of this Note
divided by the Epixtar Conversion Price II. The Epixtar Conversion II Warrant
shall have a five year term and shall be exercisable at an exercise price equal
to the greater of (i) the volume weighted-average price of the Epixtar Common
Stock for the thirty (30) trading day period immediately preceding the One Year
Anniversary Date, and (ii) One Dollar ($1.00). The Epixtar Conversion II Warrant
shall contain certain weighted-average and other customary anti-dilution
provisions but shall not provide for the cashless exercise of the Epixtar
Conversion II Warrant. If this Note is outstanding at the time of consummation
of the Voxx IPO or the Voxx Spin-Off, then the Epixtar Conversion II Warrant
shall terminate automatically upon the consummation of the Voxx IPO or the Voxx
Spin-Off. For purposes of this Note, the Voxx Spin-Off shall be deemed to have
been consummated on such date as (i) a registration statement covering the
underlying shares of Voxx Common Stock related to the Voxx Spin-Off is declared
effective by the SEC and (ii) the Voxx Common Stock commences trading on an
Approved Market. "Approved Market" shall mean any public market on which the
Voxx Common Stock is trading (it being understood that the Pink Sheets Quotation
Services shall not qualify as an Approved Market).
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7.3. Automatic Conversion. (a) If Issuer consummates the Voxx IPO, the
principal amount of this Note, together with all accrued but unpaid interest,
shall automatically, upon consummation of the Voxx IPO, without any further
action on the part of the Holder, convert into shares of Voxx Common Stock at a
twenty percent (20%) discount to the initial public offering price per share of
Voxx Common Stock (the "Discounted Voxx IPO Conversion Price"). In the event
this Note is automatically converted into Voxx Common Stock in accordance with
this Section 7.3(a), then the Holder shall be entitled to receive, in addition
to the shares of Voxx Common Stock issuable upon the automatic conversion of
this Note in accordance with this Section 7.3(a), a warrant (the "Voxx
Conversion I Warrant") to purchase the number of shares of Voxx Common Stock
equal to fifty percent (50%) of the then outstanding principal amount of this
Note divided by the Discounted Voxx IPO Conversion Price. The Voxx Conversion I
Warrant shall have a five year term and shall be exercisable at an exercise
price equal to the initial public offering price per share of Voxx Common Stock.
The Voxx Conversion I Warrant shall contain certain weighted-average and other
customary anti-dilution provisions but shall not provide for the cashless
exercise of the Voxx Conversion I Warrant. In the event the Holder (or any
transferee of the Epixtar Conversion II Warrant) exercises the Epixtar
Conversion II Warrant prior to the issuance to the Holder of the Voxx Conversion
I Warrant, then the number of shares of Voxx Common Stock issuable upon exercise
of the Voxx Conversion I Warrant shall be proportionately reduced by the number
of shares of Epixtar Common Stock previously issued to the Holder (or such
transferee of the Epixtar Conversion II Warrant) upon exercise of the Epixtar
Conversion II Warrant.
(b) If Issuer effects the Voxx Spin-Off, the principal amount of this
Note, together with all accrued but unpaid interest, shall automatically, upon
consummation of the Voxx Spin-Off as described in Section 7.2(b), without any
further action on the part of the Holder, convert into shares of Voxx Common
Stock at a twenty percent (20%) discount to the value of the Voxx Common Stock
based upon the valuation of Voxx at the time of the Voxx Spin-Off (the
"Discounted Voxx Spin-Off Conversion Price"), which valuation shall be
determined in good faith by the Board of Directors of Voxx with the consent of
the Placement Agent. In the event this Note is automatically converted into Voxx
Common Stock in accordance with this Section 7.3(b), then the Holder shall be
entitled to receive, in addition to the shares of Voxx Common Stock issuable
upon the automatic conversion of this Note in accordance with this Section
7.3(b), a warrant (the "Voxx Conversion II Warrant" and together with the Voxx
Conversion I Warrant, the "Voxx Warrants") to purchase the number of shares of
Voxx Common Stock equal to fifty percent (50%) of the then outstanding principal
amount of this Note divided by the Discounted Voxx Spin-Off Conversion Price.
The Voxx Conversion II Warrant shall have a five year term and shall be
exercisable at an exercise price equal to the value of Voxx Common Stock based
upon the valuation of Voxx at the time of the Voxx Spin-Off, which valuation
shall be determined in good faith by the Board of Directors of Voxx with the
consent of the Placement Agent. In the event the Holder (or any transferee of
the Epixtar Conversion II Warrant) exercises the Epixtar Conversion II Warrant
prior to the issuance to the Holder of the Voxx Conversion II Warrant, then the
number of shares of Voxx Common Stock issuable upon exercise of the Voxx
Conversion II Warrant shall be proportionately reduced by the number of shares
of Epixtar Common Stock previously issued to the Holder (or such transferee of
the Epixtar Conversion II Warrant) upon exercise of the Epixtar Conversion II
Warrant.
9
7.4. Conversion Price Adjustments. (a) The Epixtar Conversion Price and
the amount and kind of securities issuable upon conversion of this Note shall be
subject to adjustment from time to time in accordance with the provisions of
Section 7.4(b) and Section 8 hereof.
(b) Immediately following the final Closing of the offering of the
Notes, Issuer shall register with the SEC for resale all of the shares of
Epixtar Common Stock issuable upon conversion of this Note and the other Notes
in accordance with Sections 7.1(a) and 7.2 (based upon a conversion price of
$1.00). In the event that a registration statement covering these shares of
Epixtar Common Stock is not filed with the SEC within sixty (60) days following
the final Closing of the offering of the Notes (the sixtieth (60th) day
following the final Closing of the offering of the Notes is referred to as the
"Filing Deadline I"), then the Epixtar Conversion Price shall be immediately
reduced by five percent (5%) of the then effective Epixtar Conversion Price. The
Epixtar Conversion Price shall be reduced by an additional five percent (5%) of
the then effective Epixtar Conversion Price for each additional thirty (30) day
period (or partial period, as the case may be) following the Filing Deadline I
that such registration statement is not filed with SEC. In addition, immediately
following the One Year Anniversary Date, Issuer shall register for resale all of
the shares of Epixtar Common Stock then issuable upon conversion of the Notes
(to the extent not previously covered by the registration statement referred to
above) and the exercise of the Epixtar Warrants. In the event that a
registration statement covering these shares of Epixtar Common Stock is not
filed with the SEC within sixty (60) days following the One Year Anniversary
Date (the sixtieth (60th) day following the One Year Anniversary Date is
referred to as the "Filing Deadline II"), then the Epixtar Conversion Price II
shall be immediately reduced by five percent (5%) of the then effective Epixtar
Conversion Price II. The Epixtar Conversion Price II shall be reduced by an
additional five percent (5%) of the then effective Epixtar Conversion Price II
for each additional thirty (30) day period (or partial period, as the case may
be) following the Filing Deadline II that such registration statement is not
filed with SEC.
7.5. Due Issuance of Shares Upon Conversion. Issuer covenants and
agrees that all shares of Epixtar Common Stock, Voxx Common Stock or any such
other securities which may be issued upon any whole or partial conversion of
this Note will, upon issuance, be validly issued, fully paid and non-assessable
and free from all taxes, liens and charges with respect to the issue thereof.
10
7.6. Stock to be Reserved. Issuer will at all times reserve and keep
available out of its authorized Epixtar Common Stock and Voxx Common Stock, as
the case may be, solely for the purpose of issuance upon conversion of the Notes
and exercise of the Epixtar Warrants and Voxx Warrants, such number of shares of
Epixtar Common Stock, Voxx Common Stock or such other securities as shall then
be issuable upon conversion hereof or exercise thereof. Issuer covenants that,
to the extent permitted by law, it will from time to time take all such action
as may be required to assure that the par value per share of the Epixtar Common
Stock or Voxx Common Stock, as the case may be, is at all times equal to or less
than the effective conversion or exercise price. Issuer will not take any action
which results in any adjustment to the conversion price of the Notes if the
total number of shares of Epixtar Common Stock or Voxx Common Stock, as the case
may be, issued and issuable after such action upon conversion of this Note
would, when added to the number of shares of Epixtar Common Stock or Voxx Common
Stock, as the case may be, then reserved for issuance, exceeds the total number
of shares of Epixtar Common Stock or Voxx Common Stock, as the case may be, then
authorized by the applicable Certificate of Incorporation of Issuer.
7.7. Issue Tax. The issuance of certificates for shares of Epixtar
Common Stock, Voxx Common Stock or other securities upon conversion of this Note
shall be made without charge to the Holder for any issuance tax in respect
thereof, provided that Issuer shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder.
7.8. Closing of Books. Issuer will at no time close its transfer books
against the transfer of any shares of Epixtar Common Stock, Voxx Common Stock or
other securities issued or issuable upon the conversion of this Note in any
manner which interferes with the timely conversion of this Note, except as may
otherwise be required to comply with applicable securities laws.
SECTION 8. ADJUSTMENTS TO EPIXTAR CONVERSION PRICE AND NUMBER OF
CONVERSION SHARES.
8.1. Adjustments Upon Stock Events and Stock Issuances. Subject and
pursuant to the provisions of this Section 8.1, from and after the One Year
Anniversary Date, the Epixtar Conversion Price II and the number of shares of
Epixtar Common Stock or other securities issuable upon conversion of this Note
in accordance with Section 7.2 hereof (the "Conversion Shares") shall be subject
to adjustment from time to time as set forth hereinafter.
(a) If Epixtar shall, at any time or from time to time while this
Note is outstanding, pay a dividend or make a distribution on the Epixtar Common
Stock in shares of Epixtar Common Stock, subdivide its outstanding shares of
Epixtar Common Stock into a greater number of shares or combine its outstanding
shares of Epixtar Common Stock into a smaller number of shares or issue by
reclassification of its outstanding shares of Epixtar Common Stock any shares of
its capital stock (including any such reclassification in connection with a
consolidation or merger in which Epixtar is the continuing corporation), then
the number of Conversion Shares and the Epixtar Conversion Price II in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by Epixtar so that the Holder thereafter exercising this Note
shall be entitled to receive the number of shares of Epixtar Common Stock or
other capital stock which the Holder would have received if this Note had been
fully exercised immediately prior to such event upon payment of an Epixtar
Conversion Price II that has been adjusted to reflect a fair allocation of the
economics of such event to the Holder. Such adjustments shall be made
successively whenever any event listed above shall occur.
11
(b) If any capital reorganization, reclassification of the capital
stock of Epixtar, consolidation or merger of Epixtar with another corporation in
which Epixtar is not the survivor, or sale, transfer or other disposition of all
or substantially all of Epixtar's or any of its subsidiaries' assets to another
corporation, person or entity shall be effected (in each case, other than any
Change of Control Event or the Voxx Spin-Off), then Epixtar shall use its best
efforts to ensure that lawful and adequate provision shall be made whereby the
Holder shall thereafter have the right to purchase and receive upon the basis
and upon the terms and conditions herein specified and in lieu of the Conversion
Shares immediately theretofore issuable upon exercise of this Note, such shares
of stock, securities or assets as would have been issuable or payable with
respect to or in exchange for a number of Conversion Shares equal to the number
of Conversion Shares immediately theretofore issuable upon exercise of this
Note, had such reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the Holder
to the end that the provisions hereof (including, without limitation, provision
for adjustment of the Epixtar Conversion Price II) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise thereof.
Epixtar shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof the
successor corporation, person or entity (if other than Epixtar) resulting from
such consolidation or merger, or the corporation purchasing or otherwise
acquiring such assets or other appropriate corporation or entity shall assume
the obligation to deliver to the Holder, at the last address of such holder
appearing on the books of Epixtar, such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such Holder may be entitled to
purchase, and the other obligations under this Note. The provisions of this
paragraph (b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
12
(c) In case Issuer shall fix a payment date for the making of a
distribution to all holders of Epixtar Common Stock (including without
limitation any distribution of shares of capital stock of any subsidiary of
Epixtar (other than in connection with the Voxx Spin-Off) and any distribution
made in connection with a consolidation or merger in which Epixtar is the
continuing corporation) of evidences of indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 8.1(a)), or
subscription rights or warrants, the Epixtar Conversion Price II to be in effect
after such payment date shall be determined by multiplying the Epixtar
Conversion Price II in effect immediately prior to such payment date by a
fraction, the numerator of which shall be the total number of shares of Epixtar
Common Stock outstanding multiplied by the Market Value (as defined below) per
share of Epixtar Common Stock immediately prior to such payment date, less the
fair market value (as determined by the Board of Directors of Epixtar in good
faith) of said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the total
number of shares of Epixtar Common Stock outstanding multiplied by such Market
Value per share of Epixtar Common Stock immediately prior to such payment date.
"Market Value" as of a particular date (the "Valuation Date") shall mean the
following: (v) if the Epixtar Common Stock is then listed on a national stock
exchange, the Market Value shall be the Market Price of one share of Epixtar
Common Stock on such exchange on the last trading day prior to the Valuation
Date, provided that if such stock has not traded in the prior ten (10) trading
sessions, the Market Value shall be the average Market Price of one share of
Epixtar Common Stock in the most recent ten (10) trading sessions during which
the Epixtar Common Stock has traded; (w) if the Epixtar Common Stock is then
included in The Nasdaq Stock Market, Inc. ("Nasdaq"), the Market Value shall be
the Market Price of one share of Epixtar Common Stock on Nasdaq on the last
trading day prior to the Valuation Date or, if no such Market Price is
available, the average of the high bid and the low ask price quoted on Nasdaq as
of the end of the last trading day prior to the Valuation Date, provided that if
such stock has not traded in the prior ten (10) trading sessions, the Market
Value shall be the average Market Price of one share of Epixtar Common Stock in
the most recent ten (10) trading sessions during which the Epixtar Common Stock
has traded; (x) if the Epixtar Common Stock is then included in the
Over-the-Counter Bulletin Board, the Market Value shall be the Market Price of
one share of Epixtar Common Stock on the Over-the-Counter Bulletin Board on the
last trading day prior to the Valuation Date or, if no such Market Price is
available, the average of the high bid and the low ask price quoted on the
Over-the-Counter Bulletin Board as of the end of the last trading day prior to
the Valuation Date, provided that if such stock has not traded in the prior ten
(10) trading sessions, the Market Value shall be the average Market Price of one
share of Epixtar Common Stock in the most recent ten (10) trading sessions
during which the Epixtar Common Stock has traded; (y) if the Epixtar Common
Stock is then included in the "pink sheets, " the Market Value shall be the
Market Price of one share of Epixtar Common Stock on the "pink sheets" on the
last trading day prior to the Valuation Date or, if no such Market Price is
available, the average of the high bid and the low ask price quoted on the "pink
sheets" as of the end of the last trading day prior to the Valuation Date,
provided that if such stock has not traded in the prior ten (10) trading
sessions, the Market Value shall be the average Market Price of one share of
Epixtar Common Stock in the most recent ten (10) trading sessions during which
the Epixtar Common Stock has traded; or (z) if the Epixtar Common Stock is not
then listed on a national stock exchange or quoted on Nasdaq or the
Over-the-Counter Bulletin Board or the "pink sheets ", the fair market value of
one share of Epixtar Common Stock on the Valuation Date shall be determined in
good faith by the Board of Directors of Epixtar. "Market Price" shall mean the
closing sale price of one share of Epixtar Common Stock as listed or quoted on
the primary exchange or quotation system on which the Epixtar Common Stock is
then listed or quoted, or if not so listed or quoted, then the closing sale
price quoted on the Over-the-Counter Bulletin Board or on the "pink sheets", as
applicable. The Board of Directors of Epixtar shall respond promptly, in
writing, to an inquiry by the Holder prior to the exercise hereunder as to the
Market Value of a share of Epixtar Common Stock.
(d) For the term of this Note, in addition to the provisions
contained above, the Epixtar Conversion Price II and the number of Conversion
Shares issuable hereunder shall be subject to adjustment as provided below. An
adjustment to the Epixtar Conversion Price II shall become effective immediately
after the payment date in the case of each dividend or distribution and
immediately after the effective date of each other event which requires an
adjustment.
13
(e) Except as provided in Section 8.1(f) hereof, if and whenever
Epixtar shall issue or sell, or is, in accordance with any of Sections 8.1(e)(l)
through (e)(5) hereof, deemed to have issued or sold, any shares of Epixtar
Common Stock for a consideration per share less than the Epixtar Conversion
Price II in effect immediately prior to the time of such issue or sale, then and
in each such case (a "Trigger Issuance"), effective as of the close of business
on the effective date of the Trigger Issuance, the then-existing Epixtar
Conversion Price II shall be reduced, as of the close of business on the
effective date of the Trigger Issuance, to an Epixtar Conversion Price II
determined as follows:
Adjusted Conversion Price = (A x B) + D
-----------
A+C
where
A = the number of shares of Epixtar Common Stock outstanding
(including any Additional Shares of Common Stock (as defined below) immediately
preceding such Trigger Issuance);
B = the Epixtar Conversion Price II in effect immediately
preceding such Trigger Issuance;
C = the number of Additional Shares of Common Stock (as adjusted
for stock splits, stock combinations, recapitalizations, and dividends and the
like) outstanding or deemed outstanding hereunder as a result of such Trigger
Issuance; and
D = the aggregate consideration, if any, received or deemed to
be received by Epixtar upon such Trigger Issuance.
For purposes of this subsection (e), "Additional Shares of Common
Stock" shall mean all shares of Epixtar Common Stock issued by Epixtar or deemed
to be issued pursuant to this Section 8.1(e), other than those excluded
issuances set forth in Section 8.1(f) hereof.
For purposes of this Section 8.1(e), the following subsections
(e)(l) to (e)(5) shall also be applicable (subject, in each such case, to the
provisions of Section 8.1(f) hereof and to each other subsection contained in
this Section 8.1(e)):
14
(e)(1) Issuance of Convertible Securities; Issuance of
Rights or Options. In case at any time after the date hereof Epixtar
shall in any manner grant, issue or sell any stock or security
convertible into or exchangeable for Common Stock ("Convertible
Securities") or any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any
Convertible Securities (such warrants, rights or options being
called "Options"), whether or not the right to convert, exchange or
exercise any such Convertible Securities or such Options are
immediately exercisable, and the price per share for which Common
Stock is issuable upon the conversion or exchange of such
Convertible Securities or upon the exercise of such Options
(determined by dividing (i) the sum of (x) the total amount, if any,
received or receivable by Epixtar as consideration for the issue or
sale of such Convertible Securities or the granting of such Options,
plus (y) the aggregate amount of additional consideration, if any,
payable to Epixtar upon the conversion or exchange of all such
Convertible Securities or the exercise of all such Options, plus
(z), in the case of such Options to purchase Convertible Securities,
the aggregate amount of additional consideration, if any, payable
upon the conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities, or upon
the exercise of such Options, or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such
Options) shall be less than the Epixtar Conversion Price II in
effect immediately prior to the time of the issue or sale of such
Convertible Securities or the granting of such Options, then the
total number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities, or the exercise of such
Options, or upon the conversion or exchange of the maximum amount of
such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued for such price per share
as of the date of the issuance or sale of such Convertible
Securities or the granting of such Options (including Options to
purchase Convertible Securities) and thereafter shall be deemed to
be outstanding for purposes of adjusting the Epixtar Conversion
Price II. Except as otherwise provided in Section 8.1(e)(2), no
additional adjustment of the Epixtar Conversion Price II shall be
made upon the actual issuance of such Epixtar Common Stock upon
conversion or exchange of such Convertible Securities or upon the
exercise of such Options.
(e)(2) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the
purchase price provided for in any Option referred to in Section
8.1(e)(l) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to
in Section 8.1(e)(l), or the rate at which Convertible Securities
referred to in Section 8.1(e)(l) are convertible into or
exchangeable for Epixtar Common Stock shall change at any time
(including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Epixtar
Conversion Price II in effect at the time of such event shall
forthwith be readjusted to the Epixtar Conversion Price II which
would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold, but only
if as a result of such adjustment the Epixtar Conversion Price II
then in effect hereunder is thereby reduced. On the termination of
any Option for which an adjustment was made pursuant to this Section
8.1(e) or any right to convert or exchange Convertible Securities
for which an adjustment was made pursuant to this Section 8.1(e),
the Epixtar Conversion Price II then in effect hereunder shall
forthwith be changed to the Epixtar Conversion Price II which would
have been in effect at the time of such termination had such Option
or Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
15
(e)(3) Consideration for Stock. In case any shares of
Epixtar Common Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall
be deemed to be the gross amount received by Epixtar therefor,
before deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by Epixtar
in connection therewith. In case any shares of Epixtar Common Stock,
Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other
than cash received by Epixtar shall be deemed to be the fair value
of such consideration as determined in good faith by the Board of
Directors of Epixtar, before deduction of any expenses incurred or
any underwriting commissions or concessions paid or allowed by
Epixtar in connection therewith. In case any Options shall be issued
in connection with the issue and sale of other securities of
Epixtar, together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors
of Epixtar.
(e)(4) Record Date. In case Epixtar shall take a record
of the holders of Epixtar Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in
Epixtar Common Stock, Options or Convertible Securities or (ii) to
subscribe for or purchase Epixtar Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Epixtar Common Stock
deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may
be. Notwithstanding the foregoing, no anti-dilution adjustment shall
be effected with respect to any transaction for which a record date
is set by Epixtar if the transaction is abandoned by Epixtar prior
to the time such transaction becomes effective.
(e)(5) Treasury Shares. The number of shares of Epixtar
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of Epixtar or any of its
wholly-owned subsidiaries, and the disposition of any such shares
(other than the cancellation or retirement thereof) shall be
considered an issue or sale of Epixtar Common Stock for the purpose
of this subsection (e).
16
(f) Anything herein to the contrary notwithstanding, Epixtar shall
not be required to make any adjustment of the Epixtar Conversion Price II in the
case of the following issuances from and after the date of issuance of this
Note: (i) Options for up to 250,000 shares (subject to adjustment in the event
of a stock split, stock combination or similar event) of Epixtar Common Stock
granted after the date hereof to directors, officers, employees or consultants
of Epixtar in connection with their service as directors of Epixtar, their
employment by Epixtar or their retention as consultants by Epixtar pursuant to
any employee benefit plans or programs approved by the Board of Directors of
Epixtar or any committee thereof, (ii) shares of Epixtar Common Stock upon the
conversion or exercise of Options or Convertible Securities outstanding on the
date of issuance of this Note (including the Notes), (iii) shares of Epixtar
Common Stock issued or issuable by reason of a dividend, stock split or other
distribution payable pro rata to all holders of Epixtar Common Stock (but only
to the extent that such a dividend, split or distribution results in an
adjustment in the Epixtar Conversion Price II pursuant to the other provisions
of this Note), (iv) shares of Voxx Common Stock issued or issuable in connection
with the Voxx Spin-Off or IPO, (v) shares of Epixtar Common Stock issuable upon
exercise of the Epixtar Warrants or the Placement Agent Warrants, (vi) up to
300,000 shares of Epixtar Common Stock in connection with the acquisition of the
capital stock or assets of Innovative Marketing Strategies, Inc. and (vii)
shares of Epixtar Common Stock upon the exercise of Options granted pursuant to
subsection (i) above (collectively, the "Permitted Issuances").
(g) In the event that, as a result of an adjustment made pursuant to
this Section 8.1, the Holder shall become entitled to receive any shares of
capital stock of Epixtar other than shares of Epixtar Common Stock, the number
of such other shares so receivable upon exercise of this Note shall be subject
thereafter to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Conversion
Shares contained in this Note.
8.2. Notice of Adjustment. Upon any adjustment of the Epixtar
Conversion Price II, then and in each such case Epixtar shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to the Holder at the address
of the Holder, as provided to Epixtar, which notice shall state the Epixtar
Conversion Price II resulting from such adjustment and setting forth in
reasonable detail the method upon which such calculation is based.
8.3. Termination of Section 8.1(e). Notwithstanding anything contained
in Section 8.1(e) of this Note or any other provision of this Note, in the event
that the exchange or market on which shares of Epixtar Common Stock are then
listed prohibit "weighted average" anti-dilution provisions, such as the one
contained in Section 8.1(e) of this Note, then Section 8.1(e) of this Note shall
immediately terminate and shall no longer be effective.
SECTION 9. SUBORDINATION. (a) This Note and the other Notes and the
indebtedness evidenced hereby and thereby (the "Subordinated Debt") is
subordinated in right of payment to all obligations of Issuer to the holders of
Senior Debt. The term "Senior Debt" means all indebtedness and obligations,
whether now existing or hereafter arising (including, without limitation, with
respect to future debt financings from Laurus), due and owing to (i) Laurus and
the holders of Epixtar's secured convertible promissory notes, dated May 14,
2004, in the aggregate principal amount of Five Million Dollars ($5,000,000),
and (ii) the holders of Epixtar's 8% Convertible Promissory Notes dated April
and May 2004 in the aggregate principal amount of One Million Dollars
($1,000,000), in the case of clauses (i) and (ii), including all fees,
penalties, expenses, costs (including costs of collecting such obligations and
reasonable attorneys' fees associated therewith), default interest, acceleration
and default amounts and other amounts incurred thereunder, including, without
limitation, all interest accruing after the commencement by or against Issuer of
any bankruptcy, reorganization or similar proceeding.
17
(b) Except as set forth in this Section 9(b), no payment or
distribution (other than a payment or distribution in the form of Permitted
Junior Securities) of any assets or securities of Issuer of any kind may be made
by or on behalf of Issuer, including, without limitation, by way of payment,
pre-payment, set-off or otherwise, for or on account of this Note or any of the
other notes, and neither the Holder of this Note nor the holders of the other
Notes shall take or receive from Issuer any payment of cash or other property in
respect of all or any portion of this Note unless and until all Senior Debt is
indefeasibly paid in full in cash or such other form of consideration as the
holders of Senior Debt, in their sole discretion, may elect to accept; provided,
however, so long as no event of default or similar term has occurred and is
continuing with respect to the Senior Debt, as defined in the documents
governing the Senior Debt, Issuer shall be permitted to pay the interest due and
owing under this Note and the other Notes in accordance with the terms of such
Notes. At such time as the prohibition set forth in the preceding sentence shall
no longer be in effect, Issuer shall resume making any and all required payments
in respect of this Note and the other Notes. Nothing in this Section 9(b) shall
be deemed or construed to prohibit (i) the Holder of this Note or the holders of
the other Notes from converting all or any part of the Subordinated Debt into
shares of Epixtar Common Stock in accordance with Sections 7.1 and 7.2 of the
Notes, or (ii) the conversion of the Subordinated Debt into Voxx Common Stock in
accordance with Section 7.3 of the Notes. As used herein, "Permitted Junior
Securities" means equity securities of Issuer issued in conjunction with,
without limitation, the conversion of the Notes in accordance with Sections 7.1,
7.2 or 7.3 of the Notes or pursuant to a reorganization or readjustment of the
securities of Issuer or any other company, trust, corporation or partnership
provided for by a plan of reorganization or readjustment, that, in the case of
any such equity securities, are junior, or the payment of which is otherwise
subordinate, at least to the extent provided in this Section 9(b) with respect
to the Notes, to the payment in full of all Senior Debt outstanding, or to all
securities issued in exchange therefore, to the holder(s) of Senior Debt.
(c) Upon the occurrence of an Event of Default, holders representing
a majority-in-interest of the then outstanding Notes shall provide written
notice of such Event of Default to Laurus, on behalf of the holders of Senior
Debt (or such other holder of Senior Debt designated by the holders of Senior
Debt), and for a period commencing upon the date Laurus receives such notice and
ending 180 days from such date (the "Standstill Period"), the Holder and the
holders of the other Notes shall not demand or receive from Issuer (and Issuer
will not pay to the Holder or the holders of the other Notes) all or any part of
the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or
otherwise, other than by converting all or any part of the Subordinated Debt
into debt or equity securities of Issuer as set forth in Section 9(b) above; nor
will the Holder or the other holders of the Notes (apart from declaring an Event
of Default by written notice to Issuer), exercise any right or remedy during the
Standstill Period with respect to the Subordinated Debt (other than by
converting all or any part of the Subordinated Debt into equity securities of
Issuer as set forth in Section 9(b) above); nor will the Holder or the other
holders of the Notes during the Standstill Period commence, prosecute or
participate in any administrative, legal or equitable action against Issuer,
including, without limitation, initiation of an Insolvency Event.
Notwithstanding the foregoing, (A) in the event that Issuer is the subject of a
petition under Title 11 of the United States Code, the Holder and the other
holders of the Notes shall be entitled to file a proof of claim or take other
action to preserve their claims against Issuer provided that (i) the holders of
the Senior Debt shall be entitled to any and all proceeds or distributions that
the Holder and the other holders of the Notes may receive as the result of such
proceedings until the Senior Debt is indefeasibly paid in full in cash or such
other form of consideration as the holders of Senior Debt, in their sole
discretion, may elect to accept, and (ii) in the event that the Holder shall
fail to file a proof of claim with respect to the Subordinated Debt held by the
Holder by the date ten (10) days preceding the last day for filing proofs of
claim in such proceeding, the holders of Senior Debt shall be authorized and
permitted to file such proof of claim on behalf of the Holder; (B) in the event
that any holder of the Senior Debt accelerates the principal obligation owed
with respect to such Senior Debt, then the Holder and the other holders of the
Notes shall be entitled to accelerate the principal obligation due under the
Notes (provided that neither the Holder nor the other holders of the Notes shall
be permitted to exercise any other rights or remedies with respect to the
Subordinated Debt, except as expressly permitted under this Section 9); and (C)
in the event that any holder of the Senior Debt commences any action or
proceeding against Issuer, holders representing a majority-in-interest of the
then outstanding Notes may, in their sole discretion, 30 days after the
commencement of any such action or proceeding by a holder of the Senior Debt,
institute an action to collect the Subordinated Debt (provided that any and all
proceeds that the Holder and the other holders of the Notes may receive as a
result of such action or proceeding shall be delivered to the holders of the
Senior Debt as and to the extent required by this Section 9).
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(d) In the event that the Holder or any other holder of the Notes
receives any payment or distribution (other than a payment or distribution in
the form of Permitted Junior Securities) of assets of any kind or character
(including, without limitation, cash, property or securities) on or with respect
to the Notes at a time that such payment is prohibited by Section 9(b) or (c) of
the Notes, such payment shall be held by the Holder or the holders of the other
Notes, as the case may be, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Debt for application to the payment of all Senior Debt remaining unpaid to the
extent necessary to pay such obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to the holders of
Senior Debt.
(e) In the event of any Insolvency Event, the provisions of this
Section 9 shall remain in full force and effect, and all claims against Issuer
and the estate of Issuer in respect of Senior Debt shall be paid in full before
any payment is made to the Holder and the other holders of the Notes (other than
payment in the form of Permitted Junior Securities).
(f) The Holder and the other holders of the Notes shall not take any
action in any proceeding related to an Insolvency Event inconsistent with the
terms and conditions of this Section 9, including the payment subordination
provisions contained herein.
(g) This Section 9 shall remain effective for so long as Issuer owes
any amounts with respect to the Senior Debt. If, at any time after payment in
full of the Senior Debt, any payments of the Senior Debt must be disgorged by
the recipients for any reason (including, without limitation, the bankruptcy of
the Company), this Section 9 and the relative rights and priorities set forth
herein shall be reinstated as to all such disgorged payments as though such
payments had not been made and the Holder and the other holders of the Notes
shall immediately pay over to the holders of Senior Debt all payments received
with respect to the Subordinated Debt to the extent that such payments would
have been prohibited hereunder. At any time and from time to time, without
notice to the Holder and the other holders of the Notes, the holders of Senior
Debt may take such actions with respect to the Senior Debt as such holders, in
their sole discretion, may deem appropriate, including, without limitation,
increasing the amount of Senior Debt, extending the time of payment, shortening
the time of payment (if permitted under the documents governing the Senior
Debt), increasing applicable interest rates, renewing, compromising or otherwise
amending the terms of any documents affecting the Senior Debt and any collateral
securing the Senior Debt, and enforcing or failing to enforce any rights against
Issuer or any other person. No such action or inaction shall impair or otherwise
affect the provisions of this Section 9 and the rights of the holders of Senior
Debt hereunder.
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(h) After all Senior Debt is indefeasibly paid in full and until
this Note is paid in full, the Holder and the holders of the other Notes shall
be subrogated to the rights of the holders of Senior Debt to receive
distributions applicable to such Senior Debt, to the extent that distributions
otherwise payable to the Holder and the holders of the other Notes have been
applied to the payment of Senior Debt. A distribution made under this Section 9
to holders of Senior Debt that otherwise would have been made to the Holder or
the holders of the other Notes is not, as between the Company and the Holder and
the holders of the other Notes, a payment by Issuer on this Note and the other
Notes.
(i) The provisions of this Section 9 shall bind any successors or
assignees of the Holder and shall benefit the holders of Senior Debt and any of
their successors or assigns, and, if Issuer refinances or replaces a portion of
the Senior Debt with a new lender, such new lender shall be deemed a successor
of Laurus for the purposes of this Section 9. Each holder of Senior Debt is
hereby irrevocably made a third-party beneficiary of the rights granted to such
holders under this Section 9.
(j) The provisions of this Section 9 may be amended only by a
written instrument signed by holders of a majority-in-interest of the then
outstanding principal amount of the Notes and the holders of a majority of the
outstanding principal amount of the Senior Debt.
(k) This Section 9 defines the relative rights of the Holder and the
other holders of the Notes and the holders of the Senior Debt. Nothing in this
Agreement shall:
(i) impair, as between Issuer and the Holder or the other
holders of the Notes, the obligation of Issuer, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance with
their terms;
(ii) affect the relative rights of the Holder and the other
holders of the Notes and creditors of Issuer, other than their rights in
relation to the Senior Debt and the holders thereof; and
(iii) prevent the Holder or any other holder of the Notes from
exercising their respective available remedies upon an Event of Default in a
manner permitted by Section 9 hereof.
(l) To the extent the provisions of this Section 9 conflict with any
of the other provisions of this Note, the provisions of this Section 9 shall
control.
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SECTION 10. MISCELLANEOUS.
10.1. Failure or Delay Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right, or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available. Issuer hereby waives presentment, demand for payment,
diligence, notice of dishonor and all other notices or demands in connection
with the delivery, acceptance, performance, default or indorsement of this Note.
10.2. Notices. Unless otherwise specifically provided herein, all
communications under this Note shall be in writing and shall be deemed to have
been duly given (a) on the date personally delivered to the party to whom notice
is to be given, (b) on the day of transmission if sent by facsimile transmission
to a number provided to a party specifically for such purposes and the sending
party receives confirmation of the completion of such transmission, (c) on the
business day after delivery to Federal Express or similar overnight courier
which utilizes a written form of receipt, or (d) on the fifth day after mailing,
if mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed, return receipt
requested. All notices shall be addressed as follows: if to the Holder, at its
address as set forth in Issuer's books and records and, if to Issuer, at the
address as follows, or at such other address as the Holder or Issuer may
designate by five days' advance written notice to the other:
If to Issuer:
Epixtar Corp.
11900 Biscayne Boulevard
Miami, Florida 33181
Attention: Office of Secretary
Facsimile: (315) 503-8610
With a copy to:
Michael DiGiovanna, Esq.
212 Carnegie Center
Princeton, New Jersey 08540
Facsimile: (609) 452-9473
10.3. Amendments. Any provision of this Note may be amended, waived or
modified upon the written consent of Issuer and holders of a
majority-in-interest of the then outstanding principal amount of the Notes.
10.4. Binding Effect; Assignability. This Note shall be binding upon
Issuer, its successors and its assigns, and shall inure to the benefit of
Holder, its successors and its assigns. This Note is transferable or assignable
by the Holder; provided that such transfer or assignment is made in compliance
with the Act and any applicable state and foreign securities laws.
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10.5. Governing Law; Jurisdiction; Venue. This Note has been executed
in and shall be governed by the laws of the State of New York. Issuer
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York and the United States District Court for the Southern District of New
York for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Note. Service of process in connection with any such suit,
action or proceeding may be served on Issuer anywhere in the world by any method
authorized by law. Issuer irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court. Issuer irrevocably waives any objection to the laying of venue of any
such suit, action or proceeding brought in such courts and irrevocably waives
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
10.6. Identity of Transfer Agent. The Transfer Agent for the Epixtar
Common Stock is Interwest Transfer Company Inc. Upon the appointment of any
subsequent transfer agent for the Epixtar Common Stock or other shares of the
Issuer's capital stock issuable upon the exercise of the rights of conversion
represented by this Note, Issuer will mail to the Holder a statement setting
forth the name and address of such transfer agent.
10.7. Registration Rights. The initial holder of this Note is entitled
to the benefit of certain registration rights with respect to the shares of
Epixtar Common Stock and Voxx Common Stock underlying this Note, the Epixtar
Warrants and the Voxx Warrants, as provided in the Subscription Agreement, and
any subsequent holder hereof shall be entitled to such rights to the extent
provided in the Subscription Agreement.
10.8. No Rights as Shareholder. Prior to the conversion of this Note,
the Holder shall not have or exercise any rights as a stockholder of Issuer by
virtue of its ownership of this Note unless specifically set forth herein.
10.9. Section Headings. The section headings in this Note are for the
convenience of the Issuer and the Holder and in no way alter, modify, amend,
limit or restrict the provisions hereof.
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IN WITNESS WHEREOF, Issuer has caused this Note to be signed in its
name by its duly authorized officer and its corporate seal to be affixed hereto.
EPIXTAR CORP.
By: _______________________________
Name:
Title:
VOXX CORPORATION
By: _______________________________
Name:
Title:
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