Exhibit 4.4
No. A
THIS CONVERTIBLE PROMISSORY NOTE
HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT FOR
DISTRIBUTION AND MAY BE TRANSFERRED OR OTHERWISE DISPOSED OF ONLY
IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”). THIS LEGEND SHALL BE ENDORSED UPON ANY
CONVERTIBLE PROMISSORY NOTE ISSUED IN EXCHANGE FOR THIS CONVERTIBLE
PROMISSORY NOTE.
PARAGON FINANCIAL
CORPORATION
12.0% Convertible, Subordinated
Note; Due December 31, 2007
Dated: September 15,
2005
Issued:
IN THE PRINCIPAL AMOUNT SET FORTH
ON THE SIGNATURE PAGE HEREOF
PARAGON FINANCIAL CORPORATION, a
Delaware corporation (the “Company”), for value
received, hereby promises to pay to the individual or entity set
forth on the signature page hereof (the “Holder”) on
December 31, 2007 (the “Maturity Date”) at the
offices of the Company, 2207 Sawgrass Village Circle, Ponte Vedra
Beach, Florida 32082, or at such other address as the Company shall
advise the Holder in writing, the principal sum as stated on the
signature page hereof in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the
payment of public and private debts and to pay interest on said
principal sum at the rate of ten percent (12%) per annum.
Interest on the principal balance of this Convertible Promissory
Note (“Note”) shall be payable semi-annually on
June 30 and December 31 commencing on December 31,
2005 (which first interest payment shall be for the period from the
date hereof through December 31, 2005), until the principal
hereof shall have become due and payable, whether at maturity or by
acceleration or otherwise.
After June 30, 2006, the
Company may prepay this Note in whole or in part at any time
without premium or penalty upon ten (10) days written notice
to the Holder (“Notice of Prepayment”) by the Company
of the date of prepayment (the “Prepayment Date”). Each
prepayment shall be made together with interest accrued thereon to
and including the date of the prepayment.
1. REGISTERED OWNER
. The Company may consider and
treat the person in whose name this Note shall be registered as the
absolute owner thereof for all purposes whatsoever (whether or not
this Note shall be overdue) and the Company shall not be affected
by any notice to the contrary. Subject to the provisions hereof,
the registered owner of this Note shall have the right to transfer
it by assignment and the transferee thereof, upon his registration
as owner of this Note, shall become vested with all the powers and
rights of the transferor. Registration of any new owner shall take
place upon presentation of this Note to the Company at its offices
together
with the Note Assignment Form attached hereto
duly executed. In case of transfers by operation of law, the
transferee shall notify the Company of such transfer and of his
address, and shall submit appropriate evidence regarding the
transfer so that this Note may be registered in the name of the
transferee. This Note is transferable only on the books of the
Company by the Holder on the surrender hereof, duly endorsed.
Communications sent to any registered owner shall be effective as
against all holders or transferees of this Note not registered at
the time of sending the communication. In the event of the
assignment of a portion of the principal amount of this Note, the
transferee thereof shall not have the right to elect an Optional
Conversion (as hereinafter defined) unless the entire remaining
principal portion of this Note has been previously converted and/or
is converted simultaneously therewith.
2. CONVERSION.
2.1 Optional Conversion .
Subject to the terms of this Note, during the period commencing on
the date hereof and expiring at 5:00 P.M., Eastern Time, on the day
immediately preceding the Maturity Date (the “Conversion
Period”), the Holder shall have the right to convert the then
outstanding principal amount of this Note (or any portion thereof),
together with accrued interest thereon (an “Optional
Conversion”), into shares of Common Stock, par value $.0001
per share, of the Company (“Conversion Stock”) at a
conversion price of $0.05 per share. In the event the Company
provides a Notice of Prepayment to the Holder, the Holder shall
have the right to convert the then outstanding principal amount of
this Note (or any portion thereof), together with accrued interest
thereon, into Conversion Stock until 5:00 P.M., Eastern Time, on
the day immediately preceding the Prepayment Date (the
“Accelerated Conversion Period”) at the Conversion
Price. The number of shares of Conversion Stock issuable upon
conversion of this Note shall equal (i) the sum of
(A) the principal amount of this Note that is converted and
(B) accrued interest thereon, divided by (ii) the
Conversion Price. The foregoing conversion privilege may be
exercised during the Conversion Period or the Accelerated
Conversion Period, as the case may be, by presentation and
surrender to the Company, at its then principal office, of this
Note together with the Note Conversion Form attached hereto duly
executed. Subject to the terms hereof, upon receipt by the Company
of this Note and the Note Conversion Form, duly executed, at its
office, the Holder shall be deemed to be the holder of record of
the shares of Conversion Stock issuable upon such conversion,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares shall
not then be actually delivered to the Holder.
2.2. Restrictions On
Conversion . Unless, prior to the conversion of this Note, the
issuance of the Conversion Stock has been registered with the
United States Securities and Exchange Commission (the
“SEC”) pursuant to the Act, the Note Conversion Form
shall be accompanied by a representation of the Holder to the
Company to the effect that such shares are being acquired for
investment and not with a view to the distribution thereof, and
such other representations and documentation as may be required by
the Company, unless in the opinion of counsel to the Company such
representations or other documentation are not necessary to comply
with the Act.
2.3 Reservation Of Shares .
The Company will at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance and
delivery upon conversion
of this Note, free of preemptive or rights of
purchase, the number of shares of Conversion Stock issuable upon
conversion of this Note at the Conversion Price. The Company
covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully
paid and nonassessable.
2.4 Fractional Shares . The
Company shall not be required to issue certificates representing
fractions of shares, nor shall it be required to issue scrip or pay
cash in lieu of fractional interests, it being the intent of the
Company and the Holder that all fractional interests shall be
eliminated and that all issuances of Common Stock be rounded up to
the nearest whole share.
2.5 Rights Of The Holder .
The Holder shall not, by virtue hereof, be entitled to any rights
of a shareholder of the Company, either at law or in equity, and
the rights of the Holder is limited to those expressed in this
Note.
3. CALL OF CONVERTIBLE NOTES BY
THE COMPANY. The Company
shall not directly or indirectly, call, prepay, redeem, repurchase,
convert or otherwise acquire any Convertible Notes or any portion
thereof except as set forth in this Article 3.
3.1 Optional Conversion or
Redemption Upon Call by the Company . The Company may, at its
option, call the Convertible Notes, either in whole or in part on a
pro-rata basis:
(i) at any time prior to the
maturity of the Convertible Notes and after June 30, 2006;
or
(ii) at any time, whether prior to
or after June 30, 2006 (providing, however, with respect to
this clause (ii) only, the Company may call the Convertible
Notes only if:
(A) the Closing Price of the
Company’s Common Stock shall be equal to or in excess of
$0.20 per share for at least 10 consecutive trading days;
and
(B) in the event of a conversion
pursuant to such call, the holders of the Convertible Notes shall
be entitled to receive registered shares of the Company’s
Common Stock).
In the event of a call by the
Company pursuant to this Section 3.1, the holders, at their
option, may require the Company to convert their Convertible Notes
(into fully paid and nonassessable shares of the Company’s
Common Stock) at the Conversion Price (the “Holders
Option”).
3.2 Notice of Call . The
right of the Company to call any Convertible Notes pursuant to
Section 3.1 shall be conditioned upon its giving notice of
such call (the “Call Notice”), by personal delivery,
overnight courier, certified mail or by facsimile, signed by an
authorized officer, to the holders of Convertible Notes, not less
than fifteen (15) Business Days prior to the date upon which
the call is to be made (the “Call Date”). The Call
Notice shall specify (i) the aggregate principal amount of the
Convertible Notes to be called, (ii) the date of such call,
and (iii) the accrued and unpaid interest thereon (to, but not
including, the Call Date). Within ten
(10) Business Days after receipt of the Call
Notice by the holder of a Convertible Note, such holder shall
notify the Company, by personal delivery, overnight courier,
certified mail or by facsimile, signed by the holder, of the
Holders Option, pursuant to which the holder shall direct whether
he wishes the Convertible Notes to be converted or redeemed,
pursuant to Section 3.1 hereof (in the event that a holder
fails to respond to the Call Notice or fails to respond within the
time period or via the means set forth herein, the Holders Option
shall become void and of no further effect and the Company shall be
entitled to redeem the Convertible Notes as provided in
Section 3.1 or 3.2, as the case may be).
3.3 Partial Call . In the
event of a partial call by the Company pursuant to this Article 3,
the aggregate principal amount of each call of Convertible Notes
pursuant to Section 3.1 hereof, shall be allocated among the
Convertible Notes at the time outstanding, in proportion, as nearly
as practicable, to the respective unpaid principal amounts of such
Convertible Notes.
3.4 Surrender of Convertible
Notes Upon Call . In the event that any Convertible Notes shall
be surrendered to the Company upon conversion as provided in this
Article 3, interest shall cease to accrue upon such Convertible
Notes so surrendered.
3.5 Section 2 Applicable
. For purposes of conversion of the Convertible Notes by the
Company pursuant to this Article 3, the provisions of Sections 2.1
through 2.4 herein, shall be controlling, as if the same shall have
been contained in this Article 3 (except that with respect to
Section 2.2, in the event that a holder shall choose
redemption as the Holders Option (pursuant to Section 3.2
herein), the Company shall make payment to the holder as soon as
practicable after the Conversion Date, by check or by wire
transfer).
4. DEFAULTS
. If any one or more of the
following (“Events of Default”) shall occur:
(a) the Company shall (i) make
a general assignment for the benefit of creditors; (ii) be
adjudicated as bankrupt or insolvent; (iii) file a voluntary
petition in bankruptcy or a petition or an answer seeking an
arrangement with creditors; (iv) take advantage of any
bankruptcy, insolvency or readjustment of debt law or statute or
file an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law;
(v) apply for or consent to the appointment of a receiver,
trustee or liquidator for all or a substantial portion of its
assets; (vi) have an involuntary case commenced against it
under the Federal bankruptcy laws, which case is not dismissed or
stayed within sixty (60) days; (vii) violate any covenant
provided for in this Note and such violation shall continue
unremedied for a period of thirty (30) days following receipt
of written notice thereof from the Holder; or (viii) fail to
pay any principal or interest amount due hereunder when due and
payable and such failure shall continue unremedied for a period of
ten (10) days following receipt of written notice thereof from
the Holder; or
(b) any of the representations of
the Company contained herein are false and misleading in any
material respect; then, at any time thereafter and unless such
Event of Default with respect to clause (a) or
(b) hereof, as the case may be, shall have been cured or shall
have been waived in writing by the Holder (which waiver shall not
be deemed a waiver of any subsequent default), at the option of the
Holder and in the Holder’s sole discretion, the Holder may,
by written notice to the Company, declare the entire unpaid
principal amount of this Note then outstanding, together with
accrued interest thereon, to be forthwith due and payable,
whereupon the same shall become forthwith due and
payable.
5. INVESTMENT INTENT
.
5.1 The Holder by his acceptance
hereof, hereby represents and warrants that this Note is being
acquired for his own account, for investment purposes and not with
a view to any distribution within the meaning of the Act. The
Holder will not sell, assign, mortgage, pledge, hypothecate,
transfer or otherwise dispose of this Note unless (i) a
registration statement under the Act with respect thereto is in
effect and the prospectus included therein meets the requirements
of Section 10 of the Act, or (ii) the Company has
received a written opinion of its counsel that, after an
investigation of the relevant facts, such counsel is of the opinion
that such proposed sale, assignment, mortgage, pledge,
hypothecation, transfer or disposition does not require
registration under the Act or any state securities law.
5.2 The Holder understands that the
resale of this Note is not being registered under the Act and this
Note must be held indefinitely unless it is subsequently registered
thereunder or an exemption from such registration is
available.
5.3 The Holder represents and
warrants further that (i) he is either an “accredited
investor,” as such term is defined in Rule 501(a) promulgated
under the Act, or, either alone or with his purchaser
representative, ha
