EXECUTION
VERSION
EXHIBIT
A
NEITHER THESE
SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
AMERICAN UNITED GLOBAL,
INC.
SENIOR SECURED CONVERTIBLE
NOTE DUE
March 20,
2007
THIS NOTE is one of a series of duly authorized
and issued Notes of American United Global, Inc., a Delaware
corporation (the “ Company ”),
designated as its Senior Secured Convertible Notes due March 21,
2007, in the aggregate principal amount of $525,000 (the “
Notes ”).
FOR VALUE RECEIVED, the Company promises to pay
to the order of [Holder] or its registered assigns (the “
Holder ”), the principal sum of [__________]
$(__________), on March 21, 2007 (the “ Maturity
Date ”), or such earlier date as the Notes are
required or permitted to be repaid as provided hereunder.
Notwithstanding the foregoing, the Company hereby unconditionally
promises to pay to the order of the Holder interest on any
principal payable hereunder that shall not be paid in full when
due, whether at the time of any stated maturity or by prepayment,
acceleration or declaration or otherwise, for the period from and
including the due date of such payment to but excluding the date
the same is paid in full, at a rate of 18% per annum (but in no
event in excess of the maximum rate permitted under applicable
law).
Interest payable under this Note shall be
computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in
the period for which interest is payable.
Payments of principal and interest shall be made
in lawful money of the United States of America to the Holder at
its address as provided in Section 14 or by wire
transfer to such account specified from time to time by the Holder
hereof for such purpose as provided in Section 14
.
The Holder of this Note is entitled to the
benefits of the Security Agreement.
1.
Definitions
. In addition to the terms defined
elsewhere in this Note, (a) capitalized terms that are not
otherwise defined herein have the meanings given to such terms in
the Securities Purchase Agreement, dated as of September 21, 2005,
among the Company and the Purchasers identified therein (the
“ Purchase Agreement ”), and (b) the
following terms have the meanings indicated:
“ Conversion Date ”
means the date a Conversion Notice is delivered to the Company
together with the Conversion Schedule pursuant to Section
6(a) .
“
Conversion Notice ” means a written notice
in the form attached hereto as Schedule 1
.
“ Conversion Price
”means 50% of the Closing Price on the Trading Day
immediately preceding the date on which the applicable Conversion
Notice is delivered.
“ Equity Conditions
” means, with respect to a specified issuance of Common
Stock, that each of the following conditions is satisfied: (i) the
number of authorized but unissued and otherwise unreserved shares
of Common Stock is sufficient for such issuance; (ii) such shares
of Common Stock are registered for resale by the Holder and may be
sold by the Holder pursuant to an effective Registration Statement
covering the Underlying Shares or all such shares may be sold
without volume restrictions pursuant to Rule 144(k) under the
Securities Act; (iii) the Common Stock is listed or quoted (and is
not suspended from trading) on an Eligible Market and such shares
of Common Stock are approved for listing upon issuance; (iv) such
issuance would be permitted in full without violating Section
6(b) hereof or the rules or regulations of any Trading Market;
(v) no Bankruptcy Event has occurred; (vi) the Company is not in
default with respect to any material obligation hereunder or under
any other Transaction Document; and (vii) no public announcement of
a pending or proposed Change of Control transaction has occurred
that has not been consummated.
“Event Equity
Value” means
115% of the average of the Closing Prices for the five Trading Days
preceding the date of delivery of the notice requiring payment of
the Event Equity Value, provided that if the Company does
not make such required payment (together with any other payments,
expenses and liquidated damages then due and payable under the
Transaction Documents) when due or, in the event the Company
disputes in good faith the occurrence of the Triggering Event
pursuant to which such notice relates, does not instead deposit
such required payment (together with such other payments, expenses
and liquidated damages then due) in escrow with an independent
third-party escrow agent within five Trading Days of the date such
required payment is due, then the Event Equity Value shall be 115%
of the greater of (a) the average of the Closing Prices for the
five Trading Days preceding the date of delivery of the notice
requiring payment of the Event Equity Value and (b) the average of
the Closing Prices for the five Trading Days preceding the date on
which such required payment (together with such other payments,
expenses and liquidated damages) is paid in full.
“ Original Issue Date
” means the date of the first issuance of any Notes,
regardless of the number of transfers of any particular
Note.
“ Triggering Event
” means any of the following events: (a) the Common Stock is
not listed or quoted, or is suspended from trading, on an Eligible
Market for a period of five or more Trading Days (which need not be
consecutive Trading Days); (b) the Company fails for any reason to
deliver a certificate evidencing any Securities to a Purchaser
within five Trading Days after delivery of such certificate is
required pursuant to any Transaction Document or the exercise or
conversion rights of the Holders pursuant to any Transaction
Document are otherwise suspended for any reason; (c) the Company
fails to have available a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock available
to issue Underlying Shares upon any exercise of the Note; (d) at
any time after the Closing Date, any Common Stock issuable pursuant
to the Transaction Documents is not listed on an Eligible Market;
(e) the Company effects or publicly announces its intention to
effect any exchange, recapitalization or other transaction that
effectively requires or rewards physical delivery of certificates
evidencing the Common Stock; (f) the effectiveness of the
Registration Statement lapses for any reason or the Holder shall
not be permitted to resell any Underlying Shares under the
Registration Statement, in either case, for five or more Trading
Days (which need not be consecutive Trading Days); (g) the Company
fails to make any cash payment required under the Transaction
Documents and such failure is not cured within five days after
notice of such default is first given to the Company by a
Purchaser; (h) the Company defaults in the timely performance of
any obligation under the Transaction Documents and such default
continues uncured for a period of 20 days after the date on which
notice of such default is first given to the Company by a Purchaser
(it being understood that no prior notice need be given in the case
of a default that cannot reasonably be cured within 20 days); or
(i) the Company materially breaches any of its representations or
warranties under the Transaction Documents.
2.
Principal Payment upon
Maturity .
(a) Subject to the conditions and limitations set
forth below and at the option of the Purchasers, the Company may
pay principal on this Note in (i) cash or (ii) shares of Common
Stock. The Company must deliver written notice to the Holder
indicating the manner in which it intends to pay principal at least
30 Trading Days prior to the Maturity Date. Failure to timely
provide such written notice shall be deemed an election by the
Company to pay the amount of principal in cash.
(b) Notwithstanding the foregoing, the Company may
not pay principal by issuing shares of Common Stock unless all of
the Equity Conditions are then satisfied with respect to all shares
of Common Stock then issuable upon conversion of all outstanding
Notes.
(c) In the event that the Company pays principal in
shares of Common Stock, the number of shares of Common Stock to be
issued to each Holder as such principal shall be (i) determined by
dividing the total principal then payable to such Holder by the
lower of (y) the Conversion Price (as adjusted in accordance
herewith) and (z) the Market Price as of the such date, and
rounding up to the nearest whole share, and (ii) paid to such
Holder in accordance with Section 2(d) below. The term “
Market Price ” shall mean 85% of the
arithmetic average of the VWAP for the 20 Trading Days immediately
prior to the date on which such payment is made. In no event shall
the Market Price or the Conversion Price be less than $0.40 (as
adjusted pursuant to Section 10, the “ Floor
Price ”) if the Holder elects to be paid in Common
Stock pursuant to this Section 2.
(d) In the event that any principal is paid in
Common Stock, the Company shall within three days following the
date on which such amount was due (i) issue and deliver to such
Holder a certificate, free of restrictive legends, registered in
the name of the Holder or its designee, for the number of shares of
Common Stock to which the Holder shall be entitled, or (ii) at all
times after the Holder has notified the Company that this clause
(ii) shall apply, credit the number of shares of Common Stock to
which the Holder shall be entitled to the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit Withdrawal Agent Commission System.
(e) The Notes may not be repaid in whole or part
absent written consent from the Holder.
3.
Ranking and Covenants
.
(a) Except as set forth in Schedule 3.1(dd)
(the “ Existing Indebtedness ”) or as
otherwise permitted in Section 4.10(a) of the Purchase Agreement
(“ Permitted Indebtedness ”), no
indebtedness of the Company is senior to this Note in right of
payment, whether with respect to principal, interest, damages or
upon liquidation or dissolution or otherwise. Other than the
Existing Indebtedness and Permitted Indebtedness and any renewal,
refinancing or replacement thereof that does not exceed the
aggregate amount of the Existing Indebtedness and the borrowing
availability under the related credit or loan agreements on the
date hereof, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, enter into, create, incur,
assume or suffer to exist any indebtedness of any kind, that is
senior or pari passu in any respect to the Company’s
obligations under the Notes, other than indebtedness secured by
purchase money security interests (which will be senior only as to
the underlying assets covered thereby) and indebtedness under
capital lease obligations (which will be senior only as to the
assets covered thereby). The Company will not, and will not permit
any Subsidiary to, directly or indirectly, incur any Lien on or
with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits
therefrom.
(b) So long as any Notes are outstanding, neither
the Company nor any Subsidiary shall, directly or indirectly, (i)
redeem, purchase or otherwise acquire any capital stock or set
aside any monies for such a redemption, purchase or other
acquisition or (ii) issue any Floating Price Security (as defined
in Section 10(d)(ii)).
(c) The Company covenants that it will at all times
reserve and keep available out of its authorized but unissued and
otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Underlying Shares as required hereunder, the
number of Underlying Shares which are then issuable and deliverable
upon the conversion of (and otherwise in respect of) this entire
Note (taking into account the adjustments set forth in Section
10 and disregarding any limitations set forth in Section
6(b) ), free from preemptive rights or any other contingent
purchase rights of Persons other than the Holder. The Company
covenants that all Underlying Shares so issuable and deliverable
shall, upon issuance in accordance with the terms hereof, be duly
and validly authorized and issued and fully paid and
nonassessable.
4.
Registration of Notes
. The Company shall register the
Notes upon records to be maintained by the Company for that purpose
(the “ Note Register ”) in the name of
each record holder thereof from time to time. The Company may deem
and treat the registered Holder of this Note as the absolute owner
hereof for the purpose of any conversion hereof or any payment of
principal hereon, and for all other purposes, absent actual notice
to the contrary.
5.
Registration of Transfers and
Exchanges . The Company
shall register the transfer of any portion of this Note in the Note
Register upon surrender of this Note to the Company at its address
for notice set forth herein. Upon any such registration or
transfer, a new Note, in substantially the form of this Note (any
such new Note, a “ New Note ”),
evidencing the portion of this Note so transferred shall be issued
to the transferee and a New Note evidencing the remaining portion
of this Note not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Note by the
transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Note. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same. No service charge or other fee
will be imposed in connection with any such registration of
transfer or exchange.
(a)
At the Option of the
Holder . All or any
portion of this Note shall be convertible into shares of Common
Stock (subject to the limitations set forth in Section 6(b)
), at the option of the Holder, at any time and from time to time
from and after the Original Issue Date. The number of Underlying
Shares issuable upon any conversion hereunder shall equal the
outstanding principal amount of this Note to be converted divided
by the Conversion Price on the Conversion Date. The Holder shall
effect conversions under this Section 6(a) by delivering to
the Company a Conversion Notice together with a schedule in the
form of Schedule 2 attached hereto (the “
Conversion Schedule ”). If the Holder is
converting less than all of the principal amount of this Note, or
if a conversion hereunder may not be effected in full due to the
application of Section 6(b) , the Company shall honor such
conversion to the extent permissible hereunder and shall promptly
deliver to the Holder a Conversion Schedule indicating the
principal amount which has not been converted. In no event shall
the Conversion Price be less than the Floor Price if the Holder
elects to convert pursuant to this Section 6.
(b)
Certain Conversion
Restrictions .
(i) Relating to the Number of Shares
.
(A) Subject to
Section 6(b)(i)(B), the number of shares of Common Stock that
may be acquired by a Holder upon any conversion of Notes (or
otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other
Persons whose beneficial ownership of Common Stock would be
aggregated with such Holder’s for purposes of Section 13(d)
of the Exchange Act, does not exceed 4.999% (the “
Threshold Percentage ”) or 9.999% (the
“ Maximum Percentage”) of the total
number of issued and outstanding shares of Common Stock (including
for such purpose the shares of Common Stock issuable upon such
conversion). For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. Each delivery of
a Conversion Notice hereunder will constitute a representation by
the applicable Holder that it has evaluated the limitations set
forth in this Section 6(b)(i)(A) and has determined
that issuance of the full number of Underlying Shares issuable in
respect of such Conversion Notice does not violate the restrictions
contained in this Section 6(b)(i)(A).
(B)
Notwithstanding the provisions of Section 6(b)(i)(A), by
written notice to the Company, the Holder shall have the right (x)
at any time and from time to time to reduce its Maximum Percentage
immediately upon notice to the Company in the event and only to the
extent that Section 16 of the Exchange Act or the rules promulgated
thereunder (or any successor statute or rules) is changed to reduce
the beneficial ownership percentage threshold thereunder to a
percentage less than 9.999% and (y) at any time and from time to
time, to waive the provisions of this Section insofar as they
relate to the Threshold Percentage or to increase its Threshold
Percentage (but not in excess of the Maximum Percentage) unless the
Holder shall have, by written instrument delivered to the Company,
irrevocably waived its rights to so increase its Threshold
Percentage, but (i) any such waiver or increase will not be
effective until the 61st day after such notice is delivered to the
Company, and (ii) any such waiver or increase or decrease will
apply only to the Holder and not to any other holder of
Notes.
(C) If the
Company has not previously obtained Shareholder Approval (as
defined below), then the Company may not issue in excess of the
Issuable Maximum upon conversions of the Notes. The "
Issuable Maximum " means a number of shares equal
to 19.99% of the of the Company's outstanding shares on the Closing
Date. Each Holder shall be entitled to a portion of the Issuable
Maximum equal to the quotient obtained by dividing: (x) the
principal amount of Notes issued and sold to such Holder on the
Original Issue Date by (y) the aggregate principal amount of Notes
issued and sold by the Company on the Original Issue Date. If any
Holder shall no longer hold Notes, then such Holder's remaining
portion of the Issuable Maximum shall be allocated pro-rata among
the remaining Holders. If on any Conversion Date: (A) the aggregate
number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding principal amount of
Notes would exceed the Issuable Maximum, and (B) the Company shall
not have previously obtained the vote of shareholders, as may be
required by the applicable rules and regulations of its Trading
Market (or any successor entity) applicable to approve the issuance
of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the " Shareholder
Approval "), then, the Company shall issue to the
converting Holder a number of shares of Common Stock equal to such
Holder's pro-rata portion (which shall be calculated pursuant to
the terms hereof) of the Issuable Maximum and, with respect to the
remainder of the principal amount of Notes then held by such Holder
for which a conversion would result in an issuance of shares of
Common Stock in excess of such Holder's pro-rata portion (which
shall be calculated pursuant to the terms hereof) of the Issuable
Maximum (the " Excess Principal Amount "), the
applicable Holder shall have the right to require the Company to
either: (1) obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but
