EX-10.15
FORM OF NOTE
NEITHER THIS SECURED CONVERTIBLE PROMISSORY NOTE (THE "NOTE") NOR
THE SECURITIES
INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
FEDERAL
OR STATE SECURITIES
LAWS, AND HAVE BEEN ISSUED AND SOLD, OR WILL BE ISSUED UPON
CONVERSION, IN
RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SUCH LAWS, INCLUDING,
WITHOUT LIMITATION, THE EXEMPTION CONTAINED IN
SECTION
4(2) OF THE SECURITIES ACT. NEITHER THIS NOTE NOR THE SECURITIES
INTO WHICH THIS
NOTE IS CONVERTIBLE
MAY BE SOLD OR TRANSFERRED UNLESS (1) A REGISTRATION
STATEMENT HAS BECOME AND IS THEN EFFECTIVE WITH RESPECT TO SUCH
SECURITIES, (2)
THIS NOTE OR THE SECURITIES INTO WHICH THIS NOTE IS
CONVERTIBLE ARE TRANSFERRED
PURSUANT TO RULE 144
PROMULGATED UNDER THE
SECURITIES
ACT (OR ANY
SUCCESSOR
RULE) OR (3)
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT, TO
THE EFFECT THAT THE
PROPOSED SALE OR TRANSFER OF SUCH
SECURITIES IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ALL OTHER
APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
12% SECURED CONVERTIBLE NOTE DUE 2006
OF
SHEERVISION, INC.
$_____________
New York, New York
September 13, 2005
SHEERVISION, INC., a
California corporation (the "COMPANY"), for value
received, hereby
promises
unconditionally
to pay to the order of
____________________,
a _____________, or
such person's assigns (collectively,
the "HOLDER"), at the address set forth in Section 12 hereof, in
lawful money of
the United States of
America ("DOLLARS" or
"$") and in
immediately
available
funds, the
principal
amount
of ___________________
THOUSAND
DOLLARS
($_____,000.00) (the
"PRINCIPAL"),
plus any accrued and
unpaid Interest
(as
defined below), in full, on the Maturity Date (as defined
below).
The following
is a statement of the rights of the Holder and the
conditions to which this Note is subject, and to which the Holder
hereof, by the
acceptance of this Note, agrees:
<PAGE>
1.
DEFINITIONS. For the purposes of this Note:
"AFFILIATE(S)" means,
with respect to any
given Person other
than a partnership or limited liability company, any other Person directly or
indirectly
controlling,
controlled by or under common control with such Person
and with respect to a
partnership, the
partners of such
partnership and
with
respect to a limited
liability company,
the members of such
limited liability
company.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
a legal holiday in the State of New York.
"COLLATERAL" means all the Company's right, title and interest
in, to and under all assets, properties, accounts receivable,
accounts, chattel
paper, all claims,
causes of action,
choices in action, rights of recovery and
rights of setoff of any kind, deposit accounts, documents, equipment, general
intangibles (including, without limitation, patents, trademarks, tradenames,
domain names, service
marks, copyrights,
trade secrets,
software
(including,
without limitation,
object and source
code), any applications or registrations
therefor and
continuations thereof,
and any good will
associated
therewith),
goods, instruments, inventory, investment property, letter of
credit rights, all
books and records pertaining to any of the foregoing collateral, and all
proceeds and products of, and accessions to, any of the foregoing
collateral, in
each case, whether now
owned or hereafter
acquired and wherever
located. For
purposes of this Note,
each category of the
above-described
Collateral shall
have the meaning ascribed to it in Article 9 of the UCC, as
amended, if
defined
therein.
"COMMON STOCK" means the common stock, no par value share, of
the Company.
"CONVERSION PRICE"
means $2.70, subject to adjustment as
provided herein.
"EVENT OF DEFAULT"
shall have the
meaning assigned to such
term in Section 4.
"FAMILY MEMBER" means, with respect to any Person, any parent,
spouse, child,
brother, sister or any other relative with
a relationship (by
blood, marriage or adoption) not more remote than first cousin to
such Person.
"GOVERNMENTAL
AUTHORITY" means any
Federal, state, local,
foreign or other court, governmental department, commission, board, bureau,
agency or instrumentality.
"HOLDER MAJORITY" means the holders of a majority in principal
amount of the Notes.
"INTERCREDITOR
AGREEMENT" means the Intercreditor Agreement,
dated as of the Issue Date, among the Company, the Holder and the other
holders
of Notes (as defined herein).
"INTEREST" shall have
the meaning
assigned to such term in
Section 2(b).
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<PAGE>
"ISSUE DATE" means September 13, 2005.
"LIEN" means any mortgage, pledge, lien, security interest
or
other charge or encumbrance of any kind.
"MATERIAL ADVERSE
EFFECT" shall have the meaning assigned to
such term in Section 3(a).
"MATURITY DATE" means the earlier of (i) August 31, 2006, (ii)
upon the consummation by the Company of a merger, business
combination, sale
of
all or substantially
all of the Company's
assets or other change of control or
(iii) on the closing
of an equity or debt financing in which the Company
receives at least $3,000,000 in gross proceeds.
"MEMORANDUM"
means the Confidential Private Placement
Memorandum, dated
August 24,
2005, of the Company, relating to the private
offering and sale of the Notes.
"NOTE SHARES" means
the shares of Common Stock into which the
Principal of this Note may be converted in accordance with Section
7.
"NOTES" means this Note and the other notes issued pursuant to
the Memorandum.
"PERSON" means any individual, corporation, limited liability
company, partnership,
firm, joint venture,
association,
joint stock
company,
trust or other entity
or organization,
including a
government
or political
subdivision or an agency or instrumentality thereof.
"PROCEEDS" means all
proceeds of, and all other profits,
products, rents or
receipts, in whatever form, arising from the sale, exchange,
assignment or other disposition of Collateral.
"QUALIFIED FACILITY"
means a single
revolving credit line or
term loan entered by
the Company and one
commercial
lender into
between the
Issue Date
and the Maturity Date with a principal amount not to exceed
$1,000,000.
"SECURED OBLIGATIONS"
means the obligations of the Company
under this
Note, and the other Transaction Documents, including (i) all
Principal of, and Interest (including, without limitation, any Interest which
accrues after the commencement of any case, proceeding or other
actions relating
to the bankruptcy,
insolvency or
reorganization
of the Company and any
other
amounts owing
hereunder) on, the
Note, (ii) all other
amounts payable by
the
Company under this Note and the other Transaction Documents (including expenses
incurred in
connection
with the enforcement of each of the Transaction
Documents) and (iii) any renewals or extensions of any of the
foregoing.
"SECURITY
INTEREST" means
the security interest in the
Collateral granted hereunder securing the Secured Obligations.
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<PAGE>
"TRANSACTION
DOCUMENTS" means
this Note the Intercreditor
Agreement, the Registration Rights Letter between the Company and
each Holder.
"UCC" means the
Uniform Commercial
Code as in effect on
the
date hereof in the State of New York; PROVIDED, THAT if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection
of the Security Interest in any Collateral is governed by the
Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC"
means the Uniform
Commercial Code as in
effect in such other
jurisdiction for
purposes of the
provisions hereof
relating to such perfection or effect of perfection or
non-perfection.
2.
PRINCIPAL; INTEREST; AND PREPAYMENT.
(a) PRINCIPAL;
PRINCIPAL
INCREASE.
Unless
earlier
converted in accordance with the provisions hereof, the entire unpaid
Principal
shall be paid in Dollars on the Maturity Date. Promptly following
the payment in
full of this Note,
including all
accrued and unpaid Interest and any other
amounts owing hereunder, the Holder shall surrender this Note to
the Company for
cancellation.
(b) INTEREST.
Interest on the Note
("INTEREST"),
during
the period from the Issue Date through the Maturity Date, shall
accrue at a rate
equal to 12% per annum. Interest shall be computed on the basis of a 360-day
year consisting
of 12 equal months of
30 days applied to actual days elapsed.
Unless the Interest
on this Note is
earlier converted
in part into shares
of
Common Stock in accordance with the provisions hereof, all accrued and unpaid
interest on this Note shall be due and payable in cash on the
Maturity Date. The
rate of interest
payable under the Note from time to time shall in no event
exceed the maximum rate, if any, permissible under applicable law. If the
rate
of interest payable
under the Note is ever reduced as a result of the preceding
sentence and at any time thereafter the maximum rate permitted by
applicable law
shall exceed the rate of interest provided hereunder, then the rate
provided for
hereunder shall be increased to the maximum rate permitted by
applicable law for
such period as
required so that the
total amount of
interest received by
the
Holder is that
which would have been received by the Holder but for the
operation of the preceding sentence.
(c)
PREPAYMENT. The
Principal may be prepaid by the
Company at any time without penalty, with Interest accrued
hereunder to the date
of such prepayment without the consent of the Holder.
3.
COVENANTS.
(a) USE OF
PROCEEDS. Without the prior written consent of
a Holder Majority,
the proceeds of this
Note shall be used as described in the
Memorandum.
(b) INCURRENCE
OF INDEBTEDNESS.
Except for the Qualified
Facility, neither
the Company nor any
subsidiary
shall, without the written
consent of a Holder
Majority, (i) incur
any indebtedness
pari passu with,
or
senior to, the Notes for money borrowed or services performed,
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<PAGE>
except for trade payables, or taxes, fees, levies or charges incurred in the
ordinary course of business, leases or subleases or licenses
granted or entered
into in the ordinary
course of business, or equipment leases or purchase
financing incurred in the ordinary course of business, or (ii) grant, or permit
to be created any Lien.
(c) RELATED
PARTY TRANSACTIONS.
Neither the Company
nor
any subsidiary
shall (i) enter into
directly or
indirectly
any transaction
(including without
limitation
the purchase, lease, sale or exchange of
properties of any kind
or the rendering
of any service) with any officer,
director, employee,
or stockholder, or any Affiliate or Family Member
of any
officer, director,
employee or stockholder without the prior written consent of
a Holder Majority or
(ii) increase
the compensation payable (in the form of
salary, options,
equity or otherwise)
to any executive
officer or director of
the Company without the written consent of a Holder Majority.
(d) RESTRICTED
PAYMENTS. The Company will not, directly
or indirectly (i) purchase, redeem, retire or otherwise acquire for
value any of
its capital stock or other securities now or hereafter outstanding, return any
capital to its stockholders, or distribute any of its assets to its
stockholders
or (ii) make any payment or declare any dividend on any of its
capital stock or
other securities,
in either case, without the prior written consent of the
Holder.
(e) INSURANCE.
The Company and its subsidiaries will
maintain customary
insurance for general
liabilities and other
risks on terms
and in amounts
customarily carried by businesses similar to that of the
Company
and the subsidiaries, respectively, and reasonably sufficient to avoid a
material adverse
change in the
financial condition or
results of operation of
the Company and the Subsidiaries.
(f) COMPLIANCE
WITH LAWS, ETC. The Company and its
subsidiaries will
comply with all
applicable
laws, rules, regulations and
orders, such
compliance
to include,
without limitation, paying before they
become delinquent all taxes, assessments and governmental
charges imposed on it
or upon its property, except to the extent contested in good
faith.
(g) NO CHANGE
IN BUSINESS.
Neither the Company nor any
subsidiary will, without the prior written consent of a Holder
Majority, change
its respective line of business from that conducted by it as of the
Issue Date.
(h) ACCESS TO
FACILITIES.
The Company will permit the
Holder (or any
successor thereof),
upon reasonable notice and during normal
business hours, at such person's expense and accompanied by a
representative of
the Company, to:
(i) visit and
inspect any of the
properties of
the Company;
(ii)
examine the corporate and financial records
of the Company (unless
such examination is
not permitted by federal, state or
local law) and make copies thereof or extracts therefrom; and
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<PAGE>
(iii)
discuss the affairs,
finances and
accounts
of the Company with the directors, officers and independent
accountants of the
Company.
(i) TAXES.
The Company will
promptly pay and
discharge,
or cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges or levies imposed upon the
income, profits,
property or business
of the Company; PROVIDED, HOWEVER, that any such tax,
assessment, charge
or levy need not be paid if the validity thereof shall
currently be
contested in good faith by appropriate proceedings and if the
Company shall
have set aside on its books adequate reserves with respect
thereto, and
PROVIDED, FURTHER, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of
proceedings to
foreclose any lien which may have attached as security
therefor.
(j) FINANCIAL
REPORTING.
At all times during the
continuance of the
Company, the Company
shall prepare and maintain separate
books of account for the Company that shall show a true and
accurate record of
all costs and expenses incurred, all charges made, all credits made
and received
and all income
derived in connection with the operation of the Company's
business in accordance with US GAAP consistently applied. The Company shall (A)
prepare quarterly unaudited financial statements in accordance with
US GAAP (the
"QUARTERLY FINANCIALS") and shall deliver the Quarterly Financials
to the Holder
as soon as practicable after their preparation and in any event within
forty-five (45) days
after the end of each
three-month period and
(B) prepare
annual audited
financial statements in accordance with US GAAP (the "ANNUAL
FINANCIALS") and shall
deliver the Annual
Financials to the
Holder as soon as
practicable after
their preparation
and in any event
within ninety (90)
days
after the end of each annual period.
4.
EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the
Company shall fail to
pay when due any Principal
of, or Interest on, this Note, or any fees or any other amount payable
hereunder;
(b) the
Company shall fail to observe or perform any
covenant or agreement
of this Note or any of
the other Transaction
Documents
within ten (10) days following the receipt of written notice
thereof from, or on
behalf of, the Holder;
(c) any
representation,
warranty,
certification
or
statement made by the Company in any Transaction Document, or in any document
delivered pursuant
to any Transaction Document shall prove to have been
incorrect in any material respect when made (or deemed made);
(d)
a judgment or order for the payment of money in
excess of $300,000
shall be rendered
against the Company and such judgment or
order shall continue unsatisfied and unstayed for a period of ten
(10) days;
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<PAGE>
(e) the
Company shall commence
a voluntary case or other
proceeding seeking
liquidation,
reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or
hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of
its property, or shall
consent to any such relief or to the appointment of or
taking possession
by any such official in an involuntary case or other
proceeding commenced
against it, or shall make a general
assignment
for the
benefit of creditors,
or shall fail
generally to pay its
debts as they become
due, or shall take any corporate action to authorize any of the
foregoing;
(f) an
involuntary
case or other proceeding shall be
commenced against
the Company
seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator,
custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding
shall remain
undismissed for a
period of 60 days; or an order for relief shall
be entered against the
Company under the federal bankruptcy laws as now or
hereafter in effect; or
(g) the
Security Interest
shall, for any reason (other
than (i) the Holder's failure to renew the filing of any Uniform
Commercial Code
financing statement or (ii) pursuant to the Subordination Agreement
in the event
the Company
issues Future Notes), cease to be a first priority, perfected
security interest in and to any Collateral and such event is not
remedied within
ten (10) days
following receipt of
written notice from,
or on behalf of,
the
Holder;
then, and in every such event, the Holder may, by written notice to
the Company,
declare the Principal
(together with accrued Interest thereon and all other
amounts owing
hereunder)
to be, and the Principal (together with accrued
Interest thereon and all other amounts owing hereunder) shall
thereupon become,
immediately due and payable without presentment, demand, protest or
other notice
of any kind, all of
which are hereby waived by the Company; PROVIDED, THAT in
the case of any of the Events of Default specified in clause (e) or (f) above,
without any notice to the Company or any other act by the Holder,
the Principal
(together with accrued
Interest thereon and
all other amounts owing hereunder)
shall become immediately due and payable without presentment,
demand, protest or
other notice of any kind, all of which are hereby waived by the
Company.
5.
PAYMENTS; EXTENSION OF MATURITY. Unless otherwise converted in
accordance with the
terms of this Note,
all payments of Principal and Interest
(and all other amounts owing hereunder) to be made by the
Company in respect of
this Note shall be made in Dollars by wire transfer to an account
designated by
the Holder by written notice to the Company. All amounts payable
under this Note
shall be paid free and
clear of, and
without reduction by reason of, any
deduction, setoff,
or counterclaim. If the Principal and accrued and
unpaid
Interest become
due and payable on any day other
than a Business Day, the
Maturity Date shall be extended to the next succeeding Business
Day, and to such
payable amounts shall be added the Interest which shall have
accrued during such
extension period at the rate per annum herein specified.
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<PAGE>
6.
REPLACEMENT OF NOTE.
Upon receipt by the
Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Note,
and (in case of loss, theft or destruction) of indemnity reasonably
satisfactory
to it, and
upon reimbursement to the Company of all reasonable expenses
incidental thereto,
and (if mutilated)
upon surrender and cancellation of this
Note, the Company
shall make and deliver to the Holder a new note of like tenor
in lieu of this Note. Any replacement note made and delivered in
accordance with
this Section 6 shall be dated as of the date hereof.
7.
CONVERSION.
(a) CONVERSION
OF THE NOTE. At any time, and from time to
time, the Holder may, at its sole and exclusive option, convert up to 22.5% of
the outstanding
Principal of this Note into shares of Common Stock at the
conversion price of $2.70 per share, subject to adjustment as
provided for below
in subsection (f).
(b) MECHANICS
OF CONVERSION. If the
Holder determines to
convert a portion of this Note, the Holder shall provide ten (10) days prior
written notice
thereof to the Company of the Principal of the Note to be
converted and the name or names in which the Holder wishes the Note
Shares to be
issued, and (ii)
surrender th
