Callable Secured Convertible
Note
EX-4.3
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”). THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
REGULATION S UNDER SAID ACT.
CALLABLE
SECURED CONVERTIBLE NOTE
Chatham, New Jersey
June 30, 2006
FOR VALUE RECEIVED
, CRYSTAL
INTERNATIONAL TRAVEL GROUP, INC. , a Delaware Corporation
(hereinafter called the “ Borrower ”), hereby
promises to pay to the order of __________________ LLC or
registered assigns (the “ Holder ”) the sum of
$________, on June 30, 2009 (the “Maturity Date
”), and to pay interest on the unpaid principal balance
hereof at the rate of six percent (6%) (the “ Interest
Rate ”) per annum from June 30, 2006 (the “
Issue Date ”) until the same becomes due and payable,
whether at maturity or upon acceleration or by prepayment or
otherwise. Any amount of principal or interest on this Note
which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the
same is paid (“ Default Interest ”).
Interest shall commence accruing on the Issue Date, shall be
computed on the basis of a 365-day year and the actual number of
days elapsed and shall be payable quarterly provided that no
interest shall be due and payable for any month in which the
Trading Price (as such term is defined below) is greater than $.42
for each Trading Day (as such term is defined below) of the month.
All payments due hereunder (to the extent not converted into common
stock, $.0001 par value per share (the “Common
Stock” ) in accordance with the terms hereof) shall be
made in lawful money of the United States of America. All
payments shall be made at such address as the Holder shall
hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note. Whenever any amount
expressed to be due by the terms of this Note is due on any day
which is not a business day, the same shall instead be due on the
next succeeding day which is a business day and, in the case of any
interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term
“business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein,
and not otherwise defined, shall have the meaning ascribed thereto
in that certain Securities Purchase Agreement, dated June 30, 2006,
pursuant to which this Note was originally issued (the “
Purchase Agreement ”).
This Note is free from all
taxes, liens, claims and encumbrances with respect to the issue
thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations
of the Borrower under this Note shall be secured by that certain
Security Agreement and Intellectual Property Security Agreement,
each dated June 30, 2006 by and between the Borrower and the
Holder.
The following terms shall
apply to this Note:
ARTICLE I. CONVERSION
RIGHTS
Conversion
Right . The Holder shall have
the right from time to time, and at any time on or prior to the
earlier of (i) the Maturity Date and (ii) the date of payment of
the Default Amount (as defined in Article III) pursuant to Section
1.6(a) or Article III, the Optional Prepayment Amount (as defined
in Section 5.1 or any payments pursuant to Section 1.7, each in
respect of the remaining outstanding principal amount of this Note
to convert all or any part of the outstanding and unpaid principal
amount of this Note into fully paid and non-assessable shares of
Common Stock, as such Common Stock exists on the Issue Date, or any
shares of capital stock or other securities of the Borrower into
which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the “ Conversion Price
”) determined as provided herein (a “ Conversion
”); provided , however , that in no event shall
the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted
portion of any other security of the Borrower (including, without
limitation, the warrants issued by the Borrower pursuant to the
Purchase Agreement) subject to a limitation on conversion or
exercise analogous to the limitations contained herein) and (2) the
number of shares of Common Stock issuable upon the conversion of
the portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock and provided further that the
Holder shall not be entitled to convert any portion of this Note
during any month immediately succeeding a Determination Date on
which the Borrower exercises its prepayment option pursuant to
Section 5.2 of this Note. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such proviso.
The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of
conversion, in the form attached hereto as Exhibit A (the “
Notice of Conversion ”), delivered to the Borrower by
the Holder in accordance with Section 1.4 below; provided that the
Notice of Conversion is submitted by facsimile (or by other means
resulting in, or reasonably expected to result in, notice) to the
Borrower before 6:00 p.m., New York, New York time on such
conversion date (the “ Conversion Date ”).
The term “ Conversion Amount ” means, with
respect to any conversion of this Note, the sum of (1) the
principal amount of this Note to be converted in such conversion
plus (2) accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in this Note to the
Conversion Date, provided, however, that the Company shall have the
right to pay any or all interest in cash plus (3) Default
Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2) plus (4) at the
Holder’s option, any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of that
certain Registration Rights Agreement, dated as of June 30, 2006,
executed in connection with the initial issuance of this Note and
the other Notes issued on the Issue Date (the “
Registration Rights Agreement ”). The term
“Determination Date” means the last business day
of each month after the Issue Date.
Calculation of Conversion
Price .
The Conversion
Price shall be the Variable Conversion Price (as defined herein)
(subject, in each case, to equitable adjustments for stock splits,
stock dividends or rights offerings by the Borrower relating to the
Borrower’s securities or the securities of any subsidiary of
the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The “
Variable Conversion Price ” shall mean the Applicable
Percentage (as defined herein) multiplied by the Market Price (as
defined herein). “ Market Price ” means
the average of the lowest three (3) Trading Prices (as defined
below) for the Common Stock during the twenty (20) Trading Day
period ending one Trading Day prior to the date the Conversion
Notice is sent by the Holder to the Borrower via facsimile (the
“ Conversion Date ”). “ Trading
Price ” means, for any security as of any date, the
intraday trading price on the Over-the-Counter Bulletin Board (the
“ OTCBB ”) as reported by a reliable reporting
service ( “Reporting Service” ) mutually
acceptable to Borrower and Holder and hereafter designated by
Holders of a majority in interest of the Notes and the Borrower or,
if the OTCBB is not the principal trading market for such security,
the intraday trading price of such security on the principal
securities exchange or trading market where such security is listed
or traded or, if no intraday trading price of such security is
available in any of the foregoing manners, the average of the
intraday trading prices of any market makers for such security that
are listed in the “pink sheets” by the National
Quotation Bureau, Inc. If the Trading Price cannot be
calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually
determined by the Borrower and the holders of a majority in
interest of the Notes being converted for which the calculation of
the Trading Price is required in order to determine the Conversion
Price of such Notes. “ Trading Day ” shall
mean any day on which the Common Stock is traded for any period on
the OTCBB, or on the principal securities exchange or other
securities market on which the Common Stock is then being traded.
“ Applicable Percentage ” shall mean
50%; provided, however, that the Applicable Percentage shall be
increased to (i) 55% in the event that the Registration Statement
(as defined in the Registration Rights Agreement) is filed on or
before the Filing Date (as defined in the in the Registration
Rights Agreement) and (ii) 60% in the event that the Registration
Statement (as defined in the Registration Rights Agreement) becomes
effective on or before the Effectiveness Deadline (as defined in
the Registration Rights Agreement). In addition, the Holder
agrees that it will limit all of its conversions to no more than
the greater of (1) $80,000 per calendar month; or (2) the average
daily dollar volume calculated during the ten (10) business days
prior to a conversion, per conversion.
Conversion Price During Major
Announcements .
Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event
the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a
merger in which the Borrower is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any
person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’s
Common Stock (or any other takeover scheme) (the date of the
announcement referred to in clause (i) or (ii) is hereinafter
referred to as the “ Announcement Date ”),
then the Conversion Price shall, effective upon the Announcement
Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x)
the Conversion Price which would have been applicable for a
Conversion occurring on the Announcement Date and (y) the
Conversion Price that would otherwise be in effect. From and after
the Adjusted Conversion Price Termination Date, the Conversion
Price shall be determined as set forth in this Section 1.2(a).
For purposes hereof, “ Adjusted Conversion
Price Termination Date ” shall mean, with respect to any
proposed transaction or tender offer (or takeover scheme) for which
a public announcement as contemplated by this Section 1.2(b) has
been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause
(ii) above) consummates or publicly announces the termination or
abandonment of the proposed transaction or tender offer (or
takeover scheme) which caused this Section 1.2(b) to become
operative.
Authorized
Shares . The Borrower covenants
that during the period the conversion right exists, the Borrower
will reserve from its authorized and unissued Common Stock a
sufficient number of shares, free from preemptive rights, to
provide for the issuance of Common Stock upon the full conversion
of this Note and the other Notes issued pursuant to the Purchase
Agreement. The Borrower is required at all times to have
authorized and reserved two times the number of shares that is
actually issuable upon full conversion of the Notes (based on the
Conversion Price of the Notes or the Exercise Price of the Warrants
in effect from time to time) (the “ Reserved Amount
”). The Reserved Amount shall be increased from time to
time in accordance with the Borrower’s obligations pursuant
to Section 4(h) of the Purchase Agreement. The Borrower
represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. In addition, if the
Borrower shall issue any securities or make any change to its
capital structure which would change the number of shares of Common
Stock into which the Notes shall be convertible at the then current
Conversion Price, the Borrower shall at the same time make proper
provision so that thereafter there shall be a sufficient number of
shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Notes.
The Borrower (i) acknowledges that it has irrevocably
instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Note, and (ii) agrees
that its issuance of this Note shall constitute full authority to
its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and
conditions of this Note.
If, at any time a Holder of
this Note submits a Notice of Conversion, and the Borrower does not
have sufficient authorized but unissued shares of Common Stock
available to effect such conversion in accordance with the
provisions of this Article I (a “ Conversion Default
”), subject to Section 4.8, the Borrower shall issue to the
Holder all of the shares of Common Stock which are then available
to effect such conversion. The portion of this Note which the
Holder included in its Conversion Notice and which exceeds the
amount which is then convertible into available shares of Common
Stock (the “ Excess Amount ”) shall,
notwithstanding anything to the contrary contained herein, not be
convertible into Common Stock in accordance with the terms hereof
until (and at the Holder’s option at any time after) the date
additional shares of Common Stock are authorized by the Borrower to
permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on
the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date thereafter elected by the
Holder in respect thereof. In addition, the Borrower shall
pay to the Holder payments (“ Conversion Default
Payments ”) for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this
Note plus (2) accrued and unpaid interest on the unpaid
principal amount of this Note through the Authorization Date (as
defined below) plus (3) Default Interest, if any, on the
amounts referred to in clauses (1) and/or (2), multiplied by
(y) .24, multiplied by (z) (N/365), where N = the number of
days from the day the holder submits a Notice of Conversion giving
rise to a Conversion Default (the “ Conversion Default
Date ”) to the date (the “ Authorization
Date ”) that the Borrower authorizes a sufficient number
of shares of Common Stock to effect conversion of the full
outstanding principal balance of this Note. The Borrower
shall use its best efforts to authorize a sufficient number of
shares of Common Stock as soon as practicable following the earlier
of (i) such time that the Holder notifies the Borrower or that the
Borrower otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full
conversion thereof and (ii) a Conversion Default. The
Borrower shall send notice to the Holder of the authorization of
additional shares of Common Stock, the Authorization Date and the
amount of Holder’s accrued Conversion Default Payments.
The accrued Conversion Default Payments for each calendar
month shall be paid in cash or shall be convertible into Common
Stock (at such time as there are sufficient authorized shares of
Common Stock) at the applicable Conversion Price, at the
Borrower’s option, as follows:
In the event Holder elects to
take such payment in cash, cash payment shall be made to Holder by
the fifth (5 th ) day of the month following the month
in which it has accrued; and
In the event Holder elects to
take such payment in Common Stock, the Holder may convert such
payment amount into Common Stock at the Conversion Price (as in
effect at the time of conversion) at any time after the fifth day
of the month following the month in which it has accrued in
accordance with the terms of this Article I (so long as there is
then a sufficient number of authorized shares of Common
Stock).
The Holder’s election
shall be made in writing to the Borrower at any time prior to 6:00
p.m., New York, New York time, on the third day of the month
following the month in which Conversion Default payments have
accrued. If no election is made, the Holder shall be deemed
to have elected to receive cash. Nothing herein shall limit
the Holder’s right to pursue actual damages (to the extent in
excess of the Conversion Default Payments) for the Borrower’s
failure to maintain a sufficient number of authorized shares of
Common Stock, and each holder shall have the right to pursue all
remedies available at law or in equity (including degree of
specific performance and/or injunctive relief).
Mechanics of
Conversion .
Subject to Section
1.1, this Note may be converted by the Holder in whole or in part
at any time from time to time after the Issue Date, by
(A) submitting to the Borrower a Notice of Conversion (by
facsimile or other reasonable means of communication dispatched on
the Conversion Date prior to 6:00 p.m., New York, New York time)
and (B) subject to Section 1.4(b), surrendering this Note at
the principal office of the Borrower.
Surrender of Note Upon
Conversion .
Notwithstanding
anything to the contrary set forth herein, upon conversion of this
Note in accordance with the terms hereof, the Holder shall not be
required to physically surrender this Note to the Borrower unless
the entire unpaid principal amount of this Note is so converted.
The Holder and the Borrower shall maintain records showing
the principal amount so converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of
this Note upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall be
controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any portion of this Note is
converted as aforesaid, the Holder may not transfer this Note
unless the Holder first physically surrenders this Note to the
Borrower, whereupon the Borrower will forthwith issue and deliver
upon the order of the Holder a new Note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Note. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree
that, by reason of the provisions of this paragraph, following
conversion of a portion of this Note, the unpaid and unconverted
principal amount of this Note represented by this Note may be less
than the amount stated on the face hereof.
Payment of
Taxes .
The Borrower shall
not be required to pay any tax which may be payable in respect of
any transfer involved in the issue and delivery of shares of Common
Stock or other securities or property on conversion of this Note in
a name other than that of the Holder (or in street name), and the
Borrower shall not be required to issue or deliver any such shares
or other securities or property unless and until the person or
persons (other than the Holder or the custodian in whose street
name such shares are to be held for the Holder’s account)
requesting the issuance thereof shall have paid to the Borrower the
amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been
paid.
Delivery of Common Stock Upon
Conversion .
Upon receipt by
the Borrower from the Holder of a facsimile transmission (or other
reasonable means of communication) of a Notice of Conversion
meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3)
business days after such receipt (and, solely in the case of
conversion of the entire unpaid principal amount hereof, surrender
of this Note) (such third business day being hereinafter referred
to as the “ Deadline ”) in accordance with the
terms hereof and the Purchase Agreement (including, without
limitation, in accordance with the requirements of Section 2(g) of
the Purchase Agreement that certificates for shares of Common Stock
issued on or after the effective date of the Registration Statement
upon conversion of this Note shall not bear any restrictive
legend).
Obligation of Borrower to
Deliver Common Stock . Upon receipt by the
Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such
conversion, the outstanding principal amount and the amount of
accrued and unpaid interest on this Note shall be reduced to
reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the
portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion.
If the Holder shall have given a Notice of Conversion as
provided herein, the Borrower’s obligation to issue and
deliver the certificates for Common Stock shall be absolute and
unconditional, irrespective of the absence of any action by the
Holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in
the enforcement of any other obligation of the Borrower to the
holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion.
The Conversion Date specified in the Notice of Conversion
shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 6:00 p.m., New York, New York time,
on such date.
Delivery of Common Stock by
Electronic Transfer .
In lieu of
delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Borrower’s transfer
agent is participating in the Depository Trust Company (“
DTC ”) Fast Automated Securities Transfer (“
FAST ”) program, upon request of the Holder and its
compliance with the provisions contained in Section 1.1 and in this
Section 1.4, the Borrower shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable
upon conversion to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission (“ DWAC ”) system.
Failure to Deliver Common
Stock Prior to Deadline .
Without in any way
limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is more than three (3) business days after the Deadline
(other than a failure due to the circumstances described in Section
1.3 above, which failure shall be governed by such Section) the
Borrower shall pay to the Holder $1,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such
Common Stock but in no event shall exceed $5,000 in the aggregate.
Such cash amount shall be paid to Holder by the fifth day of
the month following the month in which it has accrued or, at the
option of the Holder (by written notice to the Borrower by the
first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in
which event interest shall accrue thereon in accordance with the
terms of this Note and such additional principal amount shall be
convertible into Common Stock in accordance with the terms of this
Note.
Concerning the
Shares . The shares of Common
Stock issuable upon conversion of this Note may not be sold or
transferred unless (i) such shares are sold pursuant to an
effective registration statement under the Act or (ii) the Borrower
or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (“ Rule 144
”) or (iv) such shares are transferred to an
“affiliate” (as defined in Rule 144) of the Borrower
who agrees to sell or otherwise transfer the shares only in
accordance with this Section 1.5 and who is an Accredited Investor
(as defined in the Purchase Agreement). Except as otherwise
provided in the Purchase Agreement (and subject to the removal
provisions set forth below), until such time as the shares of
Common Stock issuable upon conversion of this Note have been
registered under the Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold, each certificate for shares of
Common Stock issuable upon conversion of this Note that has not
been so included in an effective registration statement or that has
not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGN
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