Exhibit 10.1
AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
$2,800,000.00 New York, New York
June 30, 2005
The undersigned, FIVE STAR PRODUCTS, INC. (the "Company"), hereby
promises to pay to the order of JL DISTRIBUTORS, INC. ("Payee"; Payee, and any
subsequent holder[s] hereof, being hereinafter referred to collectively as
"Holder") on June 30, 2009, at the offices of Holder or at such other place or
places as Holder may from time to time designate in writing, in lawful money of
the United States of America, the principal amount of Two Million, Eight Hundred
Thousand and no/100 Dollars ($2,800,000.00), with interest at the rate of 9% per
annum from the date hereof, payable quarterly on September 30, December 31,
March 31, and June 30 of each year.
1. No Prepayment. The undersigned may not prepay all or any part of the
principal amount of this Note without the consent of Holder.
2. Events of Default. If any of the following events (each, an "Event of
Default") shall occur:
(a) The undersigned shall default in the payment of any installment of
interest on this Note when due, and such default shall continue for a
period of ten (10) days after written notice thereof shall have been
sent to the undersigned by Holder; or
(b) A voluntary case in bankruptcy shall be begun by the undersigned or any
order for relief against the undersigned shall be entered in an
involuntary case in bankruptcy; or
(c) The undersigned shall fail, or admit in writing its inability, to pay
its debts as they mature, by acceleration or otherwise; or make a
settlement with or general assignment for the benefit or creditors; or
a committee of creditors shall be appointed for the undersigned or a
receiver or receivers or a custodian or custodians shall be appointed
for or shall take possession of all or a substantial part of the
undersigned's property;
then (i) in the case of an Event of Default described in clause (b) or (c)
above, the outstanding principal of this Note and all accrued interest thereon
shall become immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are expressly waived; and (ii) in the case
of an Event of Default described in clause (a) above, Holder may at any time
(unless all defaults theretofore shall have been remedied), by written notice to
the undersigned, declare the principal of and the accrued interest on this Note
to be due and payable without presentment, demand, protest or further notice,
all of which are expressly waived.
3. Change of Control. At any time after a change of control of the
undersigned (as defined below) has occurred, Holder may, by written notice to
the undersigned, declare the principal of and the accrued interest on this Note
to be due and payable without presentment, demand, protest or further notice,
all of which are expressly waived. For purposes of this Note, a "change of
control of the undersigned" shall mean (a) a change of control of the
undersigned of a nature that would be required to be reported in response to
Item 1(a) of Current Report on Form 8-K pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than a change of
control of the undersigned resulting in control by Holder or a group including
Holder, (b) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than Holder or a group including Holder, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the undersigned representing 20% or
more of the combined voting power of the undersigned's then outstanding
securities, or (c) at any time individuals who were either nominated for
election by the Board of Directors of the undersigned or were elected by the
Board of Directors of the undersigned cease for any reason to constitute at
least a majority of the Board of Directors of the undersigned.
4. Conversion.
(a) The Holder may convert all or any portion of the unpaid principal
amount of, and accrued but unpaid interest on, this Note at any time
and from time to time into fully paid and non-assessable shares of the
Company's common stock, par value $0.01 per share ("Common Stock"),
based on a conversion price of $0.40 per share, subject to appropriate
adjustment for stock splits, stock dividends, combinations,
reorganization and other similar recapitalizations affecting such
shares (the "Conversion Price").
(b) To convert all or any portion of this Note, the Holder shall (i)
deliver to the Company a completed conversion notice in the form
attached hereto as Exhibit A and (ii) surrender this Note to the
Company. The date on which the Holder satisfies all of the foregoing
requirements is the "Conversion Date." As soon as practicable after the
Conversion Date, the Company shall deliver to the Holder a certificate
for, or a book-entry notation of, the number of whole shares of Common
Stock issuable upon the conversion. Upon surrender of a Note that is
converted in part, the Company shall execute and deliver to the Holder
a new Note equal in principal amount to the unconverted portion of the
Note surrendered. If less than all of this Note is converted, the
portion of this Note that is converted shall not be in an amount that
would require the issuance of a fractional share. If the Note is
converted in full and there is a resulting fractional share, the
Company shall pay a cash adjustment in respect of such fractional share
which would otherwise be issuable in an amount equal to the same
fraction of the relevant price of a share of Common Stock determined in
good faith by the Board of Directors of the Company to represent the
reasonable value of such fraction of a share of Common Stock.
(c) The Holder shall be deemed to be a stockholder of record on the
Conversion Date (or if the Note is surrendered on any date when the
stock transfer books of the Company shall be closed, then on the next
succeeding day on which such stock transfer books are open).
(d) If the Holder submits a Note for conversion, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of
shares of Common Stock upon the conversion.
(e) The Company has reserved a sufficient number of shares of Common Stock
to permit delivery of shares of Common Stock upon conversion of the
Note (and accrued but unpaid interest thereon) in full. All shares of
Common Stock delivered upon conversion of the Notes shall be duly
authorized, validly issued, and fully paid and nonassessable, shall be
free from preemptive rights and free of any lien or adverse claim
(f) If any of the following shall occur: (i) any reclassification or change
of outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination); (ii) any
consolidation, combination, merger or share exchange to which the
Company is a party other than a merger in which the Company is the
continuing corporation and which does not result in any
reclassification of, or change (other than a change in name, or par
value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock; or (iii) any sale or conveyance of all or
substantially all of the assets of the Company; then the Holder shall
have the right to convert the Note into the kind and amount of shares
of capital stock and other securities and property (including cash)
receivable upon such reclassification, change, consolidation, merger,
share exchange, sale or conveyance by a holder of the number of shares
of Common Stock deliverable upon conversion of the Note immediately
prior to such reclassification, change, consolidation, merger, share
exchange, sale or conveyance. This Paragraph 4(f) shall similarly apply
to successive consolidations, mergers, share exchanges, sales or
conveyances.
5. Registration Rights. The Holder is entitled to the benefits of a
Registration Rights Agreement, dated as of March 2, 2007, between the Company
and the Payee.
6. Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of New York.
FIVE STAR PRODUCTS, INC.
By:
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Name: John Belknap
Title: President
2
ANNEX A
CONVERSION NOTICE
The undersigned hereby irrevocably exercises the right to convert
$________ principal amount of the Amended and Restated 9% Convertible Promissory
Note of Five Star Products, Inc., a Delaware corporation ("Five Star"), as if
indicated below, any accrued but unpaid interest, into shares (the "Shares") of
the common stock of Five Star as set forth below
Conversion Calculation:
Principal Amount of Note to be Converted: $
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Amount of Accrued But Unpaid Interest to be Converted: $
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Total Dollar Amount To Be Converted: $
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Number of Shares to be issued:
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Date: _______________, 200_
JL DISTRIBUTORS, INC.
By:
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