EXHIBIT 10.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
POWERHOUSE TECHNOLOGIES GROUP, INC.
FORM OF SECURED CONVERTIBLE PROMISSORY NOTE
$xx,xxx.xx
Dated: June 9,
2005
(Original Principal Amount)
FOR VALUE RECEIVED, POWERHOUSE TECHNOLOGIES GROUP, INC., a
Delaware
corporation (the "Company"), hereby
promises to pay to _______________________
(the "Payee"), or its registered assigns,
the principal amount of xx Thousand
dollars and no cents ($xx,xxx.xx) together
with interest thereon calculated from
the date hereof in accordance with the
provisions of this Secured Convertible
Promissory Note (as amended, modified and
supplemented from time to time, this
"Convertible Note" and together with any
other Convertible Notes issued in the
Convertible Note Issuance (as defined
below) or upon transfer or exchange, the
"Convertible Notes").
Certain capitalized terms are defined in Section 10 hereof.
1. Payment of Interest. Interest shall accrue at a rate equal
to
twelve percent (12%) per annum (the
"Interest Rate") beginning on the date of
this Convertible Note on the unpaid
principal amount of this Convertible Note
outstanding from time to time; provided
that so long as any Event of Default has
occurred and is continuing, interest shall
be deemed to accrue, to the extent
permitted by law, at the rate of 14% per
annum from the date on which such
Event of Default first occurs through the
date on which such Event of Default
ceases to exist. Interest shall be computed
on the basis of the actual number of
days elapsed and a 360-day year.
2. Maturity Date. The entire principal amount of this
Convertible
Note and all accrued but unpaid interest
thereon shall be due and payable in
full in cash in immediately available funds
on the earlier to occur of August
31, 2005 and the date of closing the New
Financing (as defined herein) (the
"Maturity Date"). Any overdue principal and
overdue interest together with any
interest thereon, shall be due and payable
upon demand.
3. Conversion. (i) Notwithstanding the above, in the event a
New
Financing is consummated, the principal
amount of this Convertible Note plus
accrued and unpaid interest thereon may, at
the option of the Payee, be
converted into the New Financing at a
conversion price that is seventy-five
percent (75%) of the price paid by
investors for the securities issuable by the
Company in the New Financing. The Company
shall give the Payee not less than
five (5) days' prior written notice of the
closing of the New Financing. If the
Payee does not elect to so convert this
Convertible Note, this Convertible Note
shall be due and payable in accordance with
Section 2 hereof.
(ii) Upon any conversion of this Convertible Note into the New
Financing, the number of shares of New
Financing that shall be issuable shall
equal the number derived by dividing (x)
the then outstanding principal amount
plus accrued and unpaid interest thereon of
this Convertible Note, by (y) the
New Financing Applicable Price. The New
Financing Applicable Price shall be
seventy-five percent (75%) of the price per
share of Company Preferred Stock for
other securities paid by the investors to
the Company in the New Financing. The
New Financing securities to be issued to
the Payee upon any such conversion
shall have the same rights, preferences and
privileges as the securities offered
to investors in the New Financing. The
Payee, upon making such conversion, shall
be entitled to all the benefits of any
agreements entered into among the Company
and the investors who purchase securities
issued by the Company in the New
Financing. If the securities sold in the
New Financing are sold as units
including warrants or other debt or equity
securities, the Payee upon conversion
shall receive all the securities comprising
the units. No fractional shares
shall be issued upon a conversion into New
Financing. In lieu of any fractional
shares to which Payee would otherwise be
entitled, the Company shall pay cash
equal to such fraction multiplied by the
New Financing Applicable Price.
(iii) Except as otherwise expressly provided herein, the
conversion
of this Convertible Note shall be deemed to
have been effected as of the close
of business on the date on which this
Convertible Note has been surrendered for
conversion at the principal office of the
Company. At such time as such
conversion has been effected, the rights of
the holder of this Convertible Note
as the holder of such note shall cease
(with respect to the amount so
converted), and the Person or Persons in
whose name or names any certificate or
certificates for securities offered in the
New Financing are to be issued upon
such conversion shall be deemed to have
become the holder or holders of record
of the securities issued in the New
Financing represented thereby.
(iv) As soon as possible after the conversion has been effected
(but
in any event within three (3) Business
Days), the Company shall deliver to the
converting holder a certificate or
certificates representing the number of
shares of Preferred Stock (or other
securities offered in the New Financing)
issuable by reason of such conversion in
such name or names and such
denomination or denominations as the
converting holder has specified. Upon any
conversion of a portion of the principal
amount of this Convertible Note plus
accrued and unpaid interest, the Company
shall as soon as possible (but in any
event within three (3) Business Days),
deliver to the converting holder a new
note registered in the name of such Person
or Persons as may be designated by
the Convertible Noteholder for the
principal amount and accrued and unpaid
interest of this Convertible Note then
remaining unpaid.
(v) The issuance of certificates for securities offered in the
New
Financing that are issuable upon conversion
of this Convertible Note shall be
made without charge to the holder hereof
for any issuance tax in respect thereof
or other cost incurred by the Company in
connection with such conversion and the
related issuance of securities offered in
the New Financing or Company Common
Stock. Upon conversion of this Convertible
Note, the Company shall take all such
actions as are necessary in order to insure
that the securities offered in the
New Financing issuable with respect to such
conversion shall be validly issued,
fully paid and nonassessable.
(vi) The Company shall not close its books against the transfer
of
securities offered in the New Financing
issuable upon conversion of this
Convertible Note in any manner which
interferes with the timely conversion of
this Convertible Note. The Company shall
assist and cooperate with any holder of
this Convertible Note required to make any
governmental filings or obtain any
governmental approval prior to or in
connection with the conversion of this
Convertible Note (including, without
limitation, making any filings required to
be made by the Company).
(vii) The
Company shall at all times reserve and keep available out
of its authorized but unissued securities
of the class or classes offered in the
New Financing, solely for the purpose of
issuance upon conversion hereunder,
such number or amount of such securities as
may be issuable upon full conversion
of this Convertible Note. All such
securities which are so issuable shall, when
issued, be duly and validly issued, fully
paid and nonassessable and free from
all taxes, liens and charges. The Company
shall take all such actions as may be
necessary to assure that all such
securities may be so issued without violation
of any applicable law or governmental
regulation or any requirements of any
domestic securities exchange upon which
such shares of capital stock.
4. Board of Director Nomination Right - Secured Convertible
Note
Holders. Holders of the Secured Convertible
Notes, voting as a separate class,
shall have the right to nominate two
members of Company's Board of Directors
(the "Secured Convertible Note Holders
Directors"). The Company's Board of
Directors have the right to accept each
nomination by voting according to the
By-Laws of the Company. Acceptance of each
nomination will not be unreasonably
withheld by the Board of Directors. Once
accepted, each nominee will vote equal
with all other Board of Directors. It is
the intent of all parties that these
two nominations be made and accepted no
later than two weeks from the funding of
the Secured Convertible Bridge Loan.
Completion later than this date is not
deemed an event of Default.
5. Method of Payments.
(i) Payment. So long as the Payee or any of its nominees shall
be
the holder of any Convertible Note, and
notwithstanding anything contained
elsewhere in this Convertible Note to the
contrary, the Company will pay all
sums for principal, interest, premiums,
dividends or otherwise becoming due on
this Convertible Note held by the Payee or
such nominee not later than 1:00 p.m.
New York time, on the date such payment is
due, in immediately available funds,
in accordance with the payment instructions
that the Payee may designate in
writing, without the presentation or
surrender of such Convertible Note or the
making of any notation thereon. Any payment
made after 1:00 p.m. New York time,
on a Business Day will be deemed made on
the next following Business Day. If the
due date of any payment in respect of this
Note would otherwise fall on a day
that is not a Business Day, such due date
shall be extended to the next
succeeding Business Day, and interest shall
be payable on any principal so
extended for the period of such extension.
All amounts payable under this
Convertible Note shall be paid free and
clear of, and without reduction by
reason of, any deduction, set-off or
counterclaim. The Company will afford the
benefits of this Section to the Payee and
to each other Person holding this
Convertible Note.
(ii) Transfer and Exchange. Upon surrender of any Convertible
Note
for registration of transfer or for
exchange to the Company at its principal
office, the Company at its sole expense
will execute and deliver in exchange
therefore a new Convertible Note or
Convertible Notes, as the case may be, as
requested by the holder or transferee,
which aggregate the unpaid principal
amount of such Convertible Note, registered
as such holder or transferee may
request, dated so that there will be no
loss of interest on the Convertible Note
and otherwise of like tenor; provided that
this Convertible Note may not be
transferred by Payee to any Person other
than Payee's affiliates without the
prior written consent of the Company (which
consent shall not be unreasonably
withheld or delayed). The issuance of new
Convertible Notes shall be made
without charge to the holder(s) of the
surrendered Convertible Note for any
issuance tax in respect thereof or other
cost incurred by the Company in
connection with such issuance, provided
that each Convertible Noteholder shall
pay any transfer taxes associated
therewith. The Company shall be entitled to
regard the registered holder of this
Convertible Note as the holder of the
Convertible Note so registered for all
purposes until the Company or its agent,
as applicable, is required to record a
transfer of this Convertible Note on its
register.
(iii) Replacement. Upon receipt of evidence reasonably
satisfactory
to the Company of the loss, theft,
destruction or mutilation of any Convertible
Note and, in the case of any such loss,
theft or destruction of any Convertible
Note, upon receipt of an indemnity
reasonably satisfactory to the Company or, in
the case of any such mutilation, upon the
surrender and cancellation of such
Convertible Note, the Company, at its
expense, will execute and deliver, in lieu
thereof, a new Convertible Note of like
tenor and dated the date of such lost,
stolen, destroyed or mutilated Convertible
Note.
6. Representations and Warranties of Payee. Payee represents
and
warrants to Company that Payee is an
"accredited investor" as defined in
Regulation D under the Securities Act of
1933, as amended, and is acquiring this
Convertible Note and any and all shares of
capital stock into which this
Convertible Note is convertible solely for
its own account for the purpose of
investment and not with a view to or for
sale in connection with any
distribution thereof, and has no present
intention or plan to effect any
distribution thereof. The shares of capital
stock issuable upon conversion
hereof will bear a legend to the following
effect:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"),
or the laws of any state and may not be sold or transferred
except
in compliance with the Act and such laws."
7. Representations and Warranties of the Company. The Company
represents and warrants to Payee that:
(i) Organization and Qualification. The Company and each of its
subsidiaries is an entity duly organized,
validly existing and in good standing
under the laws of its jurisdiction of
organization, with power and authority to
conduct its business as it is now being
conducted, to own or use its properties
and assets that it purports to own or use
and, in the case of the Company, to
perform its obligations under this
Convertible Note. The Company and each of its
subsidiaries is duly qualified to do
business as a foreign company and is in
good standing under the laws of each state
or other jurisdiction in which
