THIS NOTE
AND THE RIGHTS PROVIDED HEREIN ARE SUBJECT IN ALL RESPECTS TO THE
TERMS OF THE AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN
DATE HEREWITH BETWEEN THE AGENT OF THE PAYEE AND SAND HILL FINANCE,
LLC.
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
SERIES D 6% SECURED
CONVERTIBLE PROMISSORY NOTE
|
|
|
|
|
|
|
Rutherford,
NJ
|
|
|
|
July 24, 2008
|
FOR VALUE RECEIVED , the undersigned, AXS-ONE INC., a
Delaware corporation (the “ Company ”), hereby
promises to pay to the order of
or any future holder of this promissory note (the “
Payee ”), at the principal office of the Payee set
forth herein, or at such other place as the holder may designate in
writing to the Company, the principal sum of [Amount] (U.S.
$
), or such other amount as may be outstanding hereunder (the
“ Principal Amount ”), together with all accrued
but unpaid interest, in such coin or currency of the United States
of America as at the time shall be legal tender for the payment of
public and private debts and in immediately available funds, as
provided in this promissory note (the “ Note
”).
This Note is one
of a duly authorized issue of Series D 6% Secured Convertible
Promissory Notes of the Company, in aggregate principal amount of
Two Million One Hundred Thousand Dollars ($2,100,000)
(collectively, the “ Promissory Notes ”) issued
pursuant to the Convertible Note and Warrant Purchase Agreement
dated as of July 24, 2008 (the “ Purchase
Agreement ”; capitalized terms used herein without
definition shall have the meanings assigned in the Purchase
Agreement). The Promissory Notes rank pari passu in priority
of payment and in all other respects with one another, as well as
with (i) all of the Series A 6% Secured Convertible
Promissory Notes and the Series B 6% Secured Convertible
Promissory Notes sold and issued by the Company for the aggregate
amount of $5,000,000 on May 29, 2007, pursuant to a
Convertible Note and Warrant Purchase Agreement (the “
May 2007 Notes ”) and (ii) all of
the
Series C 6% Secured Convertible Promissory Notes sold and
issued by the Company for the aggregate amount of $3,750,000 on
November 16, 2008, pursuant to a Convertible Note and Warrant
Purchase Agreement (the “ November 2007 Notes
”).
No payment,
including any prepayment, shall be made hereunder unless payment,
including any prepayment, is offered with respect to the other
Promissory Notes in an amount which bears the same ratio to the
then unpaid principal amount of such Promissory Notes as the
payment made hereon bears to the then unpaid principal amount under
this Note.
1.
Principal and Interest Payments .
(a) The
Company shall repay in full the entire principal balance then
outstanding under this Note plus all accrued and unpaid interest on
the first to occur (the “ Maturity Date ”) of:
(i) May 29, 2009; (ii) such time as there occurs a
Sale Transaction (as defined below) or (iii) the acceleration
of the obligations as contemplated by this Note.
“ Sale
Transaction ” shall mean (i) the sale or other
disposition of all or substantially all of the Company’s
assets, or (ii) the acquisition of the Company by another
entity by means of any transaction or series of related
transactions to which the Company is party (including, without
limitation, any stock acquisition, reorganization, merger or
consolidation but excluding any sale of stock for capital raising
purposes) other than a transaction or series of transactions in
which the holders of the voting securities of the Company
outstanding immediately prior to such transaction continue to
retain (either by such voting securities remaining outstanding or
by such voting securities being converted into voting securities of
the surviving entity), as a result of shares in the Company held by
such holders prior to such transaction, at least fifty percent
(50%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding
immediately after such transaction or series of
transactions.
(b) Interest
on the outstanding principal balance of this Note shall accrue at a
rate of six percent (6.00%) per annum, compounded quarterly.
Interest on the outstanding principal balance of this Note shall be
computed on the basis of the actual number of days elapsed and a
year of three hundred sixty (360) days and shall be payable on
the Maturity Date, upon earlier prepayment of this Note or in the
form of shares of common stock, par value $0.01 per share, of the
Company (the “ Common Stock ”) upon conversion
of this Note as set forth in Section 8 below. Furthermore,
upon the occurrence and during the continuance of an Event of
Default, then to the extent permitted by law, the Company will pay
interest to the Payee, payable on demand, on the outstanding
principal balance of this Note from the date of the Event of
Default until cure thereof or payment in full, at a per annum rate
equal to the lower of (i) five percent (5%) above the rate
charged or then eligible to be charged by Sand Hill Finance, LLC or
any other senior lender to the Company, or (ii) the maximum rate
permitted by law, in either case compounded quarterly.
(c) The
Company may not prepay the outstanding principal amount of this
Note or the interest thereon prior to the Maturity Date (a “
Prepayment ”) without the written consent of the
Payee, unless the Company shall provide at least thirty
(30) days prior written notice of the date on which the
Company intends to make such Prepayment (a “
Prepayment
2
Notice ”). Any partial Prepayment shall be
applied first to accrued but unpaid interest and second to unpaid
principal. Nothing in this Section 1(c) shall limit the right of
the Payee to convert this Note into Common Stock at any time after
receipt of the Prepayment Notice and prior to the time at which
such Prepayment is made.
2.
Non-Business Days . Whenever any payment to be made shall be
due on a non-Business Day, such payment may be due on the next
succeeding Business Day and such next succeeding day shall be
included in the calculation of the amount of accrued interest
payable on such date.
3.
Security . This Note is secured pursuant to the terms of a
Security Agreement dated as of May 29, 2007 between the
Company and the other parties set forth therein as amended pursuant
to a Security Agreement Amendment dated as of November 16,
2007 and a Second Security Agreement Amendment dated as of July
___, 2008 between the Company and the holders of the Promissory
Notes (such Security Agreement, as amended, the “ Security
Agreement ”) by a security interest in the Collateral (as
such term is defined in the Security Agreement), which security
interest will rank pari passu with the security interests
granted in connection with the May 2007 Notes and the
November 2007 Notes. This Note is subject to the provisions of
the Security Agreement.
4.
Subordination of Future Debt; Payment of Dividends . Except
as provided in the Transaction Documents, any debt incurred after
the date hereof to any creditor shall be subordinated to the
indebtedness evidenced by this Note. The Company shall not declare
or pay any dividend or distribution with respect to any preferred
stock or Common Stock of the Company other than a pro rata dividend
with respect to the Common Stock payable solely in shares of Common
Stock.
5.
Representations and Warranties of the Company . The Company
represents and warrants to the Payee as follows:
(a) The
Company has been duly incorporated and is validly existing and in
good standing under the laws of the state of Delaware, with full
corporate power and authority to own, lease and operate its
properties and to conduct its business as currently
conducted.
(b) This
Note has been duly authorized, validly executed and delivered on
behalf of the Company and is a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement
of creditors’ rights generally, and the Company has full
power and authority to execute and deliver this Note and to perform
its obligations hereunder.
6.
Events of Default . The occurrence of any of the following
events shall be an “ Event of Default ” under
this Note:
3
(a) the
Company shall fail to pay the principal or any accrued interest
hereunder, or under any other Note, the May 2007 Notes or the
November 2007 Notes after the date such payment shall become
due and payable hereunder or thereunder; or
(b) if
default shall be made in the performance or observance of any
representation, warranty, covenant, or agreement contained in this
Note, in the Security Agreement, in the Purchase Agreement, in the
Investor Rights Agreement, in any other Note, in any May 2007
Note, in any November 2007 Note, or in any other agreement
between the Company and the Payee relating to indebtedness of the
Company to the Payee or any of its affiliates for borrowed money
and such default shall have continued for a period of five
(5) days after Company’s receipt of written notice of
such default (unless such default is on account of failure to give
a required notice, in which event such 5 day cure period shall
commence with the date of such default); or
(c) the
Company shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its
property or assets, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case
under the United States Bankruptcy Code (the “ Bankruptcy
Code ”) or under the comparable laws of any jurisdiction
(foreign or domestic), (iv) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium, reorganization
or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition
filed against it in an involuntary case under the Bankruptcy Code
or under the comparable laws of any jurisdiction (foreign or
domestic), or (vi) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the
foregoing; or
(d) a
proceeding or case shall be commenced in respect of the Company or
any of its subsidiaries without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation,
reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of
all or any substantial part of its assets or (iii) similar
relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i),
(ii) or (iii) shall continue undismissed, or unstayed and
in effect, for a period of thirty (30) consecutive days or any
order for relief shall be entered in an involuntary case under the
Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic) against the Company or any of its
subsidiaries or action under the laws of any jurisdiction (foreign
or domestic) analogous to any of the foregoing shall be taken with
respect to the Company or any of its subsidiaries and shall
continue undismissed, or unstayed and in effect for a period of
ninety (90) consecutive days.
7.
Remedies Upon an Event of Default . If an Event of Default
shall have occurred and shall be continuing, the Payee of this Note
may at any time at its option, declare the entire unpaid principal
balance of this Note, together with all interest accrued hereon,
due and payable, and thereupon, the same shall be accelerated and
so due and payable; provided , however , that upon
the occurrence of an Event of Default described in
(i) Sections 6(c) and (d), without presentment, demand,
protest, or notice, all of which are hereby expressly
4
unconditionally
and irrevocably waived by the Company, the outstanding principal
balance and accrued interest hereunder shall be automatically due
and payable, and (ii) Sections 6(a) and (b) the Payee may
exercise or otherwise enforce any one or more of the Payee’s
rights, powers, privileges, remedies and interests under this Note
or applicable law. No course of delay on the part of the Payee
shall operate as a waiver thereof or otherwise prejudice the right
of the Payee. No remedy conferred hereby shall be exclusive of any
other remedy referred to herein or now or hereafter available at
law, in equity, by statute or otherwise.
(a)
General . The holder of this Note shall have the right at
any time, at such holder’s option, to convert all or any
lesser portion of the Principal Amount plus accrued and unpaid
interest thereon into such number of fully paid and non-assessable
shares of Common Stock as is determined by dividing (i) the
portion of the Principal Amount to be converted plus accrued and
unpaid interest thereon by (ii) the Conversion Rate (as
defined below) then in effect for this Note. The initial conversion
rate shall be $1.00, such rate to be subject to adjustment in
accordance with the provisions of this Section 8. Such
conversion rate in effect from time to time, as adjusted pursuant
to this Section 8, is referred to herein as a “
Conversion Rate .” All of the remaining provisions of
this Section 8 shall apply separately to each Conversion Rate
in effect from time to time with respect to this Note.
(b)
Mechanics of Conversion .
(i) Such
right of conversion shall be exercised by the Payee by delivering
to the Company a conversion notice in the form attached hereto as
Exhibit A (the “ Conversion Notice
”), appropriately completed and duly signed, and by surrender
not later than two (2) Business Days thereafter of this Note. The
Conversion Notice shall also contain a statement of the name or
names (with addresses and tax identification or social security
numbers) in which the certificate or certificates for Common Stock
shall be issued, if other than the name in which this Note is
registered. Promptly after the receipt of the Conversion Notice,
the Company shall issue and deliver, or cause to be delivered, to
the Payee or such Payee’s nominee, a certificate or
certificates for the number of shares of Common Stock issuable upon
such conversion. Such conversion shall be deemed to have been
effected as of the close of business on the date of receipt by the
Company of the Conversion Notice (the “ Conversion
Date ”), and the person or perso
|
