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Exhibit 10.3
THIS SECURED CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), NOR QUALIFIED UNDER ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II) THE COMPANY
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY
THAT EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS
OF APPLICABLE STATE SECURITIES LAWS ARE AVAILABLE.
COMMERCE PLANET, INC.
FORM OF SECURED CONVERTIBLE PROMISSORY NOTE
DATED: September __, 2008
DUE: March 31, 2009
FOR VALUE RECEIVED, COMMERCE PLANET, INC., a Utah corporation
(the “ Company ”) with an address at 30 S. La
Patera Lane, Goleta, CA 93117, hereby promises to pay to the order
of MORLEX, INC., a Colorado corporation (the “ Payee
”) or its registered assigns (together with the Payee, the
“ Holder ”), the sum of Two Hundred Thousand
Dollars ($200,000.00) or such lesser amount as shall then be
outstanding hereunder.
Effective as at the date of this Note, the Company and its
Subsidiaries, Legacy Media LLC (“ Legacy ”) and
Consumer Loyalty Group LLC (“ Consumer ”) have
entered into an asset purchase agreement (the “ Purchase
Agreement ”) with the Payee and its Subsidiary Superfly
Advertising, Inc. (“ Superfly
”). Unless otherwise defined in this Note, all
capitalized terms used herein shall have the same meaning as is
defined in the Purchase Agreement.
The following is a statement of the rights of the Holder of this
Note and the conditions to which this Note is subject, and to which
the Holder hereof, by the acceptance of this Note, agrees:
1. Maturity
Date and Payment .
(a) The
entire outstanding principal amount of this Note shall be due and
payable, together with all interest accrued hereon, on the earliest
to occur of (i) March 31, 2009, (ii) the Closing of the
transactions contemplated by the Purchase Agreement, or (iii) the
termination of the Purchase Agreement by any one or more parties
thereto (the “ Maturity Date ”).
(b) On
the Closing Date and simultaneously with the Closing of the
transactions contemplated by the Purchase Agreement, the entire
unpaid principal amount of this Note and all interest accrued
hereon shall be forgiven and deemed part of the cash portion of the
Purchase Price, all as contemplated by Section 3.1(b) of the
Purchase Agreement.
2.
Interest .
This
Note shall bear interest at the annual rate of six percent (6%)
which shall accrue and be added to the outstanding principal amount
of this Note, and shall be payable on the Maturity
Date. Notwithstanding the foregoing, if this Note shall
not be paid or satisfied in full on the Maturity Date, this Note
shall bear interest, commencing on the Maturity Date, at the rate
of ten percent (10%) per annum until repaid (all such accrued
interest collectively, the “ Penalty Interest ”)
which shall be due and payable as and when accrued.
3.
Prepayment . The Company shall not have the right
to prepay this Note in whole or in part prior to the Maturity Date,
without the prior written consent or approval of the Holder.
4. Events of
Default . If any of the events specified in this
Section 3 shall occur (herein individually referred to as an
“ Event of Default ”) and shall not have been
cured within ten Business Days after written notice of such default
has been given by the Holder to the Company, the Holder of the Note
may, so long as such condition exists, declare the entire principal
and unpaid accrued interest hereon immediately due and payable:
4.1 Default
in the payment of the principal amount of this Note and all accrued
interest when due on the Maturity Date; provided, however, that the
notice and cure period provided in Section 4 above shall not apply
to this Section 4.1; or
4.2 (a) The
institution by the Company of proceedings to be adjudicated as
bankrupt or insolvent, or the consent by it to institution of
bankruptcy or insolvency proceedings against it or the filing by it
of a petition or answer or consent seeking reorganization or
release under the federal Bankruptcy Act, or any other applicable
federal or state law, or the consent by it to the filing of any
such petition or the appointment of a receiver, liquidator,
assignee, trustee or other similar official of the Company, as
applicable, or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
taking of corporate action by the Company in furtherance of any
such action; and
(b) if,
within sixty (60) days after the commencement of an action against
the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such action shall not have been
resolved in favor of the Company, as applicable, or all orders or
proceedings thereunder affecting the operations or the business of
the Company, as applicable, stayed, or if the stay of any such
order or proceeding shall thereafter be set aside, or if, within
sixty (60) days after the appointment without the consent or
acquiescence of the Company, as applicable, of any trustee,
receiver or liquidator of the Company, as applicable, or of all or
any substantial part of the properties of the Company, such
appointment shall not have been vacated.
4.3 Default
by the Company, Legacy and/or Consumer in the observance of or
performance of any other term, covenant or agreement contained
herein or any other agreement by and among the Company, Legacy
and/or Consumer on the one hand, and Payee and or Superfly on the
other hand, including, without limitation, the Purchase Agreement,
the Unconditional Guaranty Agreement (as defined in the Purchase
Agreement), the Pledge and Security Agreement (as defined in the
Purchase Agreement) and the Voting Agreement (as defined in the
Purchase Agreement); provided, however, that in the event that the
default is a default in payment or reimbursement under any such
agreement, the notice and cure period provided in Section 4 above
shall not apply.
If any Event of Default has occurred and is continuing, the
Holder of this Note may at any time, at its or his option, by
notice or notices to the Company, declare this Note to be
immediately due and payable. Upon this Note becoming due and
payable under this Section 4 (a “ Default
”), such Note will forthwith mature and the entire unpaid
principal amount of such Note, plus all accrued and unpaid interest
thereon shall all be immediately due and payable, in each and every
case without presentment, demand, protest or further notice, all of
which are hereby waived. If any Default or Event of
Default has occurred and is continuing, the Holder of this Note may
proceed to protect and enforce the rights of such Holder by an
action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of the rights of the Holder
under this Note, or for an injunction against a violation of any of
the terms hereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
2
5. Guaranty
of Note; Collateral.
5.1 Payment and
performance of this Note by the Company is unconditional and
irrevocably guaranteed by each of Legacy and Consumer pursuant to
the guaranty agreement annexed hereto as Exhibit A and made
a part hereof (the “ Guaranty ”).
5.2 As
collateral to secure payment of this Note and the obligations of
Legacy and Consumer under the Guaranty, Legacy and Consumer shall
pledge to the Payee the merchant accounts, including without
limitation the credit card reserve accounts, listed on Schedule
5.2 to the Purchase Agreement (the “ Pledged
Accounts ”), pursuant to the pledge agreement annexed
hereto as Exhibit B and made a part hereof (the “
Pledge Agreement ”).
6.
Conversion .
6.1 Upon
the Maturity Date, if the Company shall not have paid this Note in
full, then and in such event, the Holder of this Note shall have
the right at the Holder’s sole option, to convert all or any
portion of this Note (including accrued interest hereon), into Ten
Million (10,000,000) shares (the “ Conversion Shares
”) of fully paid and non-assessable common stock, $0.001 par
value per share, of the Company (the “ Common Stock
”). The number of Conversion Shares shall be subject to
adjustment as provided below.
6.2 Upon
any such conversion pursuant to this Section 6:
(a) the
Company shall issue and deliver to the Holder stock certificates
for the applicable number of Conversion Shares into which this Note
was converted and this Note shall be deemed cancelled to the extent
converted, and (b) if the entire principal amount together
with interest accrued thereon of this Notes shall not have been
converted, the Holder of this Note shall receive from the Company,
together with the applicable number of Conversion Shares, a new
Note in the appropriate principal amount or cash as provided in
Section 6.7.
6.3 If the Holder
elects to convert this Note into Common Stock, it shall, within ten
(10) days prior to or after the Maturity Date, surrender this Note
at the principal office of the Company and shall give written
notice, in the form annexed hereto as Exhibit C and made a
part hereof, by facsimile, certified or registered mail, postage
prepaid (or any other reasonable means of communication), to the
Company at its principal corporate office, of the election to
convert the same pursuant to Section 6.1 , and shall state
therein the name or names in which the certificate or certificates
for Common Stock are to be issued (the “ Conversion
Notice ”). The Company shall, as soon as
practicable thereafter (but in no event more than five (5) Business
Days), issue and deliver at such office to the Holder of this Note
a certificate or certificates for the number of Common Stock to
which the Holder of this Note shall be entitled as
aforesaid. Such conversion shall be deemed to have been
made on the date of the Conversion Notice, an
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